China’s largest hypermarket operator has suspended trading in its Hong Kong-listed shares since Friday pending an announcement on mergers and acquisitions, fueling speculation that Alibaba Group Holding could divest its controlling shares.
Alibaba took control of Sun Art Retail Group from the Mulliez, a wealthy French family, in October 2020 for HK$28 billion (US$3.6 billion), as the e-commerce giant sought to synergize online shopping and offline hypermarkets under a “new retail”. model.
Sun Art’s shares recently traded at HK$1.79, down about 78 percent from the per-share price of about HK$8.1 that Alibaba paid at the time of its investment. Alibaba owns the South China Morning Post.
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Sun Art did not provide any details about possible acquisitions or mergers in the stock exchange application. The company declined to comment further. Alibaba did not immediately respond to a request for comment on Monday.
An Alibaba office building in Beijing. Photo: Reuters alt=An Alibaba office building in Beijing. Photo: Reuters>
The wait has led to market speculation about a partial or complete sell-off of Alibaba’s stake in Sun Art. The hypermarket operator has attracted “preliminary interest” from private equity firms including DCP Capital and Hillhouse Investment, Bloomberg reported on Friday, citing unnamed sources.
According to analysts, a divestment by Alibaba is likely.
“There is a high probability that it will involve a change in equity, and in that case the possibility of a change in Alibaba’s equity is relatively high,” said Kenny Ng, strategist at Everbright Securities International.
‘After all, Alibaba owns the majority of the shares [Sun Art’s] shares.”
A sell-off by Alibaba would be in line with its recent moves to slim down non-core assets and sharpen its focus on core businesses amid mounting challenges including increasing e-commerce competition and sluggish revenue growth.
“Now the major e-commerce platforms are mainly concentrating on lower-end markets and operating under greater competitive pressure. It has become a general trend to downsize some non-core businesses,” Ng said.
According to Bai Wenxi, chief economist of China Enterprise Capital Union, a divestment could signal a change in Alibaba’s strategic positioning.
Sun Art stores, which mainly include supermarket brands RT-Mart and Auchan, have adopted a new retail strategy after coming under Alibaba’s control.
The hypermarket chain has connected its inventory to multiple Alibaba platforms, including on-demand delivery service Ele.me, fresh food delivery service Taoxianda and Tmall Supermarket.
An RT-Mart hypermarket in Shanghai. Photo: Bloomberg alt=An RT-Mart hypermarket in Shanghai. Photo: Bloomberg>
But previous Covid-19 restrictions, as well as the “many trials and costs” associated with the integration process, have slowed development, Ng said.
He expected business to improve after Alibaba said in August that most of its businesses, excluding e-commerce and cloud computing, are expected to break even within a year or two.
The Hangzhou-based e-commerce giant has continued to consolidate its retail assets since last year as the company looks to refocus on its bread-and-butter e-commerce and cloud businesses amid an extensive restructuring process unveiled in March 2023.
The company has been considering selling many of its non-core businesses, such as brick-and-mortar retail.
Sun Art’s revenue fell 13.3 percent year-on-year to 72.6 billion yuan ($10.3 billion) during the financial year ended March 31, partly due to the contraction of supply chain operations and store closures .
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