Alibaba To Buy 36% Stakes Of Sun Art For $2.9 Billion

Internet giant Alibaba Group Holding Ltd said it would invest HK$22.4 billion ($2.87 billion) for a major stake in China's top hypermart operator, Sun Art Retail Group Ltd, part of a wider push into offline retail. As part of an alliance with Auchan Retail S.A. and Ruentex Group, Alibaba would buy the stake from Ruentex while Auchan Retail would boost its stake.

The alliance would target opportunities in China's $500 billion food retail sector, as Alibaba races to build big-data capabilities in the offline retail market where roughly 85 percent of sales are made.

Alibaba Chief Executive Officer Daniel Zhang said “Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalised services in the digital economy. On one hand they really need to do it, but on the other hand they are facing a lot of challenges that they have never experienced before.

Deal would give French retailer Groupe Auchan SA, China's Alibaba Group and Taiwanese conglomerate Ruentex 36.18 percent, 36.16 percent and 4.67 percent stakes respectively in Sun Art. Alibaba would replace Ruentex as the second-largest shareholder.

Alibaba has invested upwards of $9.3 billion in brick-and-mortar stores since 2015. It has launched many un-staffed concept shops in the past year, including grocery and coffee stores.

The $474 billion firm is taking more risks to secure offline, rural and overseas buyers as China's urban e-commerce market shows signs of saturating, including purchasing extensive infrastructure which it had previously avoided.

Bain & Company analyst Weiwen Han said "They're getting into a territory that's not their core strength for example securing a property, the licenses to sell certain products, paying tax, and more labor and so on”.

Sun Art is China's grocery store leader with about 8.2 percent of the market, according to data from Kantar Worldpanel.

It operates about 450 hypermarkets across China under the RT-Mart and Auchan banners. It also operates unmanned stores under the Auchan Minute brand.