Alibaba's US$692m Intime investment to push online-to-offline sales channel

E-commerce giant looks to develop a unified sales environment for merchants and shoppers through the US$692m investment in Intime

PUBLISHED : Tuesday, 01 April, 2014, 1:20am
UPDATED : Tuesday, 01 April, 2014, 1:20am

E-commerce giant Alibaba has stepped up its cross-sector acquisitions with a deal to invest US$692 million in Hong Kong-listed Intime Retail, one of the mainland's largest operators of department stores.

The transaction, which includes the establishment of a joint venture between the two companies, will enable Alibaba to rapidly develop a unified online, mobile and offline retail sales environment for merchants and shoppers across the mainland.

"We hope to make Intime a new platform for the online and offline economies, creating a new business model to serve the entire retail industry," Alibaba chief operating officer Daniel Zhang Yong said in Beijing yesterday. "Everybody knows online to offline is the market direction. We need to be a pioneer and take the first step forward."

Zhang said the plan was to integrate and analyse data from 600,000 subscribers of Alipay, the online payment affiliate of Alibaba, and 300,000 users of Taobao Marketplace and with that of Intime's membership base, which included users of its retail website, to better understand customer needs and improve services.

Alibaba agreed to invest US$214 million in cash for a 9 per cent equity interest in Intime and subscribe to US$478 million worth of convertible bonds issued by the Beijing-based operator of department stores and shopping centres.

If the group converted those bonds, it would have an equity stake of up to 25 per cent in Intime.

That investment has pushed up Alibaba's spending to more than 24 billion yuan (HK$30.2 billion) since lead founder Jack Ma Yun stepped down as chief executive last year.

Ricky Lai, a research analyst at Guotai Junan International, said: "The investment in Intime would not only help raise Alibaba's valuation ahead of its [initial public offering] in the United States, but also complete efforts by the company to become a one-stop e-commerce, physical retail and logistics service provider."

Recent reports have speculated Alibaba's valuation would be around US$250 billion.

In May, Hangzhou-based Alibaba led an announcement by the Cainiao Network Technology consortium, in which it has a 43 per cent stake and invested 2.15 billion yuan, to build a nationwide logistics infrastructure for about 100 billion yuan.

In December, the group agreed to a three-part deal worth HK$4.13 billion with Haier Electronics, which runs the Goodaymart logistics enterprise.

Intime chief executive Chen Xiaodong said there were investors who did not understand the Alibaba deal as shares of the department store operator fell 7.53 per cent to HK$8.35 yesterday.