Alibaba, Intime founder offer HK$19.8bn to take retail group private

PUBLISHED : Tuesday, 10 January, 2017, 9:33am
UPDATED : Tuesday, 10 January, 2017, 11:50pm

E-commerce giant Alibaba Group Holding has teamed up with the founder of Intime Retail (Group) Company to take the mainland shopping mall and department store chain operator private in a HK$19.8 billion cash transaction.

The proposed privatisation has come less than two years after Alibaba invested US$692 million in Hong Kong-listed Intime as part of a series of business expansion initiatives made by the group months before its initial public offering in New York in November 2014.

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Alibaba Investment, a wholly owned subsidiary of Alibaba, and an entity run by Intime chairman Shen Goujun made the offer on Tuesday, according to a joint filing with the Hong Kong stock exchange.

Under the proposed deal, shares in Intime will be cancelled in exchange for a payment by the joint offerors at HK$10 per share, representing a premium of approximately 53.59 per cent over the average closing price of Intime shares over the last 60 days, and 42.25 per cent over the closing price of HK$7.03 before trading was suspended on December 28.

Intime, which resumed trading on Tuesday, saw its shares jump 35.7 per cent to close at HK$9.54

“Put simply, the impetus behind this deal must be to ensure that Alibaba has control of a bricks-and-mortar platform to advance its ambitions in the retail space,” said Paul Haswell, a partner at international law firm Pinsent Masons.

Alibaba, which owns the South China Morning Post, would become the controlling shareholder of Intime under that deal, with its equity stake increasing to about 74 per cent from the current 28 per cent.

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
Daniel Zhang Yong, Alibaba chief executive

Intime operates 29 department stores and 17 shopping malls, mainly in first- and second-tier cities on the mainland. The retailer has a particularly strong footprint in Zhejiang province, where Alibaba is headquartered.

In a statement on Tuesday, Alibaba chief executive Daniel Zhang Yong said: “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.”

Zhang said Alibaba was working with offline retailers to create a “new consumer shopping experience and use actions to embrace future opportunities under the new retail model”.

He pointed out that the mainland’s total retail sector was worth US$4.5 trillion and is growing at 10.7 per cent a year.

Jefferies equity analyst Jessie Guo said in a report on Tuesday that Alibaba’s efforts to integrate online and offline consumer data are expected to “improve operating efficiency and tap into long-term growth potential”.

Alibaba and Shen’s group, represented by Honor Mind Holdings, said in the joint filing that they are financing the proposed Intime deal through “internal cash resources and/or external debt financing”.

The transaction is subject to customary closing conditions, including approval from Intime’s independent shareholders. In its interim filing last year, Intime reported a 21 per cent year-on-year decrease in net profit to 561 million yuan (HK$628.7 million) on total revenue of about 3 billion yuan.