Alibaba Selling Hypermarket Operator Sun Art to DCP Capital for $1.6B

The new year finds Alibaba Group continuing its retreat from brick-and-mortar retail, with the e-commerce giant on Wednesday announcing plans to sell its controlling stake in Chinese hypermarket operator Sun Art for HK$12.3 billion ($1.6 billion).

The buyer of the 73.66 percent stake is a fund managed by Beijing private equity firm DCP Capital, Alibaba said in a filing with the Hong Kong stock exchange. Upon completion of the transaction, the tech titan will cease to have an equity interest in Sun Art, which runs 466 hypermarkets, 30 superstores and six membership stores across 206 Chinese cities.

Alibaba expects to book an attributable loss of RMB 13.2 billion ($1.8 billion) from the Sun Art disposal, according to the filing. The news comes two weeks after Alibaba revealed its intention to sell its Intime department store chain for $1 billion, incurring a likely loss of $1.3 billion.

“The disposal is considered to be a good opportunity for Alibaba Group to monetise its non-core assets and to utilise such proceeds to better focus on the development of its core businesses and enhance its shareholder return,” said the company founded by billionaire Jack Ma. “Alibaba Group remains confident in the prospect of China’s consumer market.”

‘New Retailing’ Goes Awry

Hangzhou-based Alibaba paid $3.6 billion in 2020 to acquire its controlling stake in Sun Art from entities controlled by the Mulliez family of France. The deal, conducted through Alibaba’s Taobao China Holding unit, boosted the group’s holding from the 36.16 percent it had acquired for $2.9 billion in 2017.

Operating stores under the RT-Mart brand, Sun Art recorded a net loss of RMB 1.7 billion for the year ended 31 March 2024, reversing a marginal year-earlier profit of RMB 78 million, according to the filing.

The Sun Art buy was one of a series of investments made by Alibaba as it sought to leverage its online power and cash resources to take on traditional offline commerce. The “new retailing” drive saw the group sink more than $630 million into Red Star Macalline in 2019, only to sell the home improvement chain to state-owned Xiamen C&D less than four years later.

Red Star Macalline counted as Alibaba’s second investment in home products retailing, with the company having previously invested RMB 5.45 billion to acquire 15 percent of Red Star rival Easyhome. Other plays included a bet on Hema supermarkets, now renamed Freshippo, where customers can shop or dine in the physical store while inspecting products that they can order online through a mobile app.

Alibaba’s pending sale of Intime department stores to Chinese apparel company Youngor Fashion was first reported by the South China Morning Post in mid-December. The divestment comes seven years after Alibaba joined forces with Intime’s founder to take the company private in a $2.6 billion deal.

Changes in Store

DCP Capital, led by former KKR execs David Liu and Julian Wolhardt, intends to support Sun Art’s existing principal activities and work closely with management “to drive both customer and shareholder value”, according to a separate filing Wednesday.

“By partnering with DCP Capital, the company will have the opportunity to benefit from (DCP’s) deep industry knowledge and strong operational resources to further enhance its competitive position in the dynamic retail industry,” the private equity firm said.

Sun Art board members Han Liu and Qin Yuehong will step down and be replaced by new directors nominated by DCP Capital, whose prior investments have included Beijing-based data centre operator Hotwon Group.