Alibaba Group Holding Ltd is leading a bid to take department-store chain Intime Retail Group Co. private for as much as $2.6 billion, as China’s largest online retailer deepens its integration with bricks-and-mortar stores.
The deal to buy out Intime adds to Alibaba’s burgeoning foothold in physical retail, as it pursues growth beyond a slowing online business. Control of Intime will also allow the e-commerce giant to explore ways to modernise a $4.5 trillion industry that has not adapted well to the growing popularity of online shopping.
Billionaire founder Jack Ma’s goal is to try and up-end a splintered and bloated Chinese retail landscape, stripping out layers of middlemen to reduce costs and improve efficiency. Apart from Intime, Alibaba has partnered with electronics chains Suning and Haier in deals that expanded its own online offerings and sales and delivery network.
“This deal shows that there is still value to brick[s]-and-mortar stores, enough to interest e-commerce players,” said Catherine Lim, a Singapore-based analyst at Bloomberg Intelligence. “What it’s shown is that department-store chains are still relevant and of value. We could be seeing renewal of a sunset industry.”
Alibaba and Intime’s founder, Shen Guojun, will pay HK$10 apiece for the Intime shares that the former doesn't already own – a deal that will require as much as HK$19.8 billion ($2.55 billion), including stock options. That’s a 42% premium over Intime’s previous close. The Hong Kong-listed company’s stock surged 35% upon resuming trade after a recent two-week suspension.
Alibaba, which will own almost three quarters of Intime, is paying a premium for a company that has seen revenue shrink since the second half of 2015. The offer values Intime at about 18.7 times Ebitda of 1.39 billion yuan ($201 million) for the 12 months ended June 2016, the latest period available, according to Bloomberg calculations. That compares with the 7.2 times of $414.6 million in Ebitda that Sycamore Partners paid for US department-store chain Belk, Inc. in 2015, according to Bloomberg’s calculations.
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