Alibaba Sheds Sun Art Stake for $1.6 Billion, Shares React

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Shares of China’s Sun Art Retail Group (HK:6808) plummeted on Thursday after Alibaba Group (NYSE:BABA) (HK:9988) announced plans to sell its majority stake in the hypermarket chain to Chinese private equity firm DCP Capital for HK$12.30 billion ($1.58 billion).  

According to a Hong Kong Stock Exchange filing on Wednesday, Alibaba will divest its 78.7% stake in Sun Art, held through its subsidiaries.  

Sun Art’s Hong Kong-listed shares plunged over 30% to HK$1.6 on Thursday, while Alibaba shares declined 1.1%.  

Alibaba had acquired its controlling interest in Sun Art in 2020 for $3.6 billion, intending to merge its digital capabilities with Sun Art’s widespread hypermarket network in China.  

The $1.58 billion sale price is significantly lower than Alibaba’s initial investment and reflects the company’s efforts to streamline its operations and refocus on core e-commerce activities.  

“This divestment represents an opportunity for Alibaba to monetize non-core assets and allocate proceeds to advancing its primary businesses and improving shareholder returns,” the company stated.  

In addition to Sun Art, Alibaba is also selling its Chinese department store unit, Intime, despite projecting a $1.3 billion financial loss from the transaction.  

Last month, Alibaba announced plans to consolidate its domestic and international e-commerce platforms under a unified business unit to enhance operational efficiency amidst growing competition from low-cost retailers.  

Alibaba indicated that proceeds from the sale would be used for business growth, shareholder returns, and general corporate purposes.

 

 

 

 

 

 

 

 

 

 

Paraphrasing text from "Investing" all rights reserved by the original author.