Alibaba Snaps Up China’s Leading Hypermarket Operator

Alibaba Group Holding Ltd. will take over China’s leading hypermarket operator in a $3.6 billion deal, making the e-commerce giant the dominant force in the nation’s converging online and offline grocery markets.

Sun Art Retail Group Ltd., which runs the China operations of the Auchan and RT-Mart hypermarket chains, had 484 stores across the country as of June, according to an Alibaba statement.

Alibaba’s online marketplace subsidiary Taobao China Holding Ltd. and Sun Art released a joint statement on Monday saying that Sun Art will transfer to Alibaba’s control an aggregate 70.94% stake in a holding company whose main asset is a 51% stake in Sun Art. That stake, combined with Alibaba’s existing 21% direct holding in Sun Art, will give it control of 72% of the company’s shares.

The stock of Hong Kong-listed Sun Art closed up 19.17% Monday.

The acquisition followed a similar deal in 2017 in which Alibaba invested HK$22.4 billion ($2.8 billion) to obtain an aggregate direct and indirect stake in Sun Art of about 36%, the statement said.

“As the Covid-19 pandemic is accelerating the digitalization of consumer lifestyle and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience,” Alibaba Chairman and CEO Daniel Zhang said in a statement.

The deal comes as part of Alibaba’s long-running plans to expand its brick-and-mortar retail presence as it faces challenges in the online grocery sector, which saw a surge this year due to nationwide lockdowns during the pandemic. Alibaba launched online-to-offline supermarket chain Freshippo in 2016, to compete against the likes of JD Inc.-backed Dada Nexus Ltd., Tencent Holdings Ltd.-backed Missfresh, and food delivery giant Meituan Dianping.

Alibaba’s latest investment will give it control over a total of 716 Chinese mainland brick-and-mortar stores under the Freshippo, RT-Mart and Auchan brands.

Sun Art has a 14.1% share of the hypermarket sector — a market valued at $92.88 billion in 2019, which HSBC expects to more than double in size by 2022 — followed by China Resources Holdings Co. Ltd., Yonghui Superstores Co Ltd. and Wal-Mart (China) Investment Co. Ltd., according to market research firm Euromonitor International.

Alibaba’s internet rival Tencent Holdings Ltd. owns a 5% stake in Yonghui.

Alibaba said in a Monday filing to the Hong Kong Stock Exchange it has the option to pay up to HK$17 billion to buy the remaining Sun Art shares and it will include Sun Art in its financial reports.

Contact editor Anniek Bao (yunxinbao@caixin.com) Joshua Dummer (joshuadummer@caixin.com)

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