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Alibaba has announced a proposal to privatise the Intime Retail Group, an investment-holding company that manages department stores and shopping malls in China.
Alibaba Investment, a wholly owned subsidiary of Alibaba Group Holding, together with an entity wholly owned by Shen Guo Jun, the founder of Intime Retail, have asked the board of directors of Intime to put forward to shareholders a proposal to privatise the company by way of a scheme of arrangement.
Under the proposal, shares in Intime would be cancelled in exchange for a payment by the joint offerors at HK$10 (US$1.29) a share, representing a premium of about 53.59 per cent over the average closing price of Intime shares over the past 60 days, and 42.25 per cent over the closing price of HK$7.03 before trading was suspended on December 28.
Intime runs 29 department stores and 17 shopping malls, mainly in first- and second-tier cities in China. It has a particularly strong footprint in Zhejiang province, where Alibaba Group is headquartered. Alibaba owns about 28 per cent of the equity interests in Intime pursuant to an initial investment in July 2014 and a conversion into equity of convertible debt securities in June last.
Under the proposed transaction, Alibaba would become the controlling shareholder of Intime, and it is expected its shareholding in the company would increase to about 74 per cent. This reflects Alibaba Group’s strategy to transform conventional retail by leveraging its substantial consumer reach, rich data and technology.
The dynamic shift to mobile in China has enabled Alibaba Group to work with brick-and-mortar retailers to integrate online and offline customer data, enhance consumers’ in-store experiences as well as achieve improvements in inventory efficiency and sales turnover.
As of the quarter ended September, 78 per cent of the gross merchandise volume on Alibaba Group’s China retail marketplaces was generated from mobile, and monthly active mobile users reached 450 million in September.
“China’s total retail sector is a US$4.5 trillion economy and is growing at 10.7 per cent a year,” says Alibaba Group CEO Daniel Zhang. “Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experiences and use actions to embrace future opportunities under the new retail model.
“We don’t divide the world into real or virtual economies, only the old and the new. Those who cling on to the old ways of retailing will be disrupted, and brick-and-mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency. Our combination with Intime will enable us to tap into the long-term growth potential of a new form of retail in China powered by internet technology and data.”
Alibaba says the maximum amount of cash needed for the Intime proposal is expected to be about HK$19.8 billion. The two companies are financing the transaction through internal cash resources and/or external debt financing.
The proposed transaction is subject to customary closing conditions, including approval from Intime’s independent shareholders and the sanction of the Grand Court of the Cayman Islands where the company is registered.