[Observer Network Synthesis] Alibaba’s new retail layout will go to the next city! On January 10th, Yintai Commercial announced on the Hong Kong Stock Exchange that Yintai would be privatized. The joint offerors included Alibaba Investment, a wholly-owned subsidiary of Alibaba Group, and the wholly-owned company of Shen Guojun, the founder of Yintai Commercial. The transaction amount reached 19.8 billion Hong Kong dollars (about 17.7 billion RMB), which was 42% higher than the last trading day before the suspension. According to the announcement, Alibaba will become the controlling shareholder of Yintai after privatization, and its shareholding ratio is expected to increase to about 74%.
Yintai Commercial Announcement on January 10th
This is the latest move of Alibaba to promote the transformation of "new retail" after Ali Zetai, a subsidiary of Ali Department, subscribed for Sanjiang Shopping as a strategic investor at the end of last year, and Yiguo Fresh of Ali Department took over all the shares of Lianhua Supermarket held by Yonghui Supermarket.
Stimulated by this news, Yintai Commercial once rose by 37.98% after its recent opening. On the same day, retail stocks also rose collectively, with the overall increase of the sector exceeding 1%.
Massive privatization
According to the announcement, the joint offeror will pay HK$ 10.00 per planned share, which is about 53.59% higher than the average closing price of the last 60 trading days, and about 42.25% higher than the closing price of HK$ 7.03 per share on the last trading day before the suspension on December 28, 2016.
At present, through the initial investment in July 2014 and the conversion of convertible bonds in June 2016, Alibaba holds about 28% interest in Yintai. butAfter privatization, Alibaba will become the controlling shareholder of Yintai, and its shareholding ratio is expected to increase to about 74%..
The announcement also mentioned that,The maximum cash amount required to complete the proposed transaction is about 19.8 billion Hong Kong dollars (about 17.7 billion yuan), and the co-sponsors are financing the transaction with internal cash resources or external debt..
The cooperation between Alibaba and Yintai can be traced back to May 2013. Alibaba and Yintai Group jointly built the "China Intelligent Logistics Backbone Network" project, namely the rookie network. Yintai Group invested 1.6 billion yuan, accounting for 32% of the shares, becoming the second largest shareholder.
On October 17th of the same year, Alibaba Group announced that it had reached a strategic cooperation with Yintai to explore the integration of online and offline (O2O). In June 2016, Yintai Commercial Group announced that it had accepted Alibaba’s share swap notice. After the completion of the share swap, Alibaba’s total shareholding in Yintai will reach 27.90%, officially becoming the largest shareholder of Yintai Commercial.
Since it is already the largest shareholder, why should Alibaba continue to privatize Yintai?
Zhang Yong, CEO of Alibaba Group, said: "The total scale of the retail industry in China has reached 4.5 trillion US dollars, and it is growing at an annual rate of 10.7%. Alibaba Group is working with offline retailers to reconstruct the traditional format, innovate the user consumption experience, and embrace the long-term development opportunities brought by new retail with practical actions. "
Zhang Yong believes that there is no distinction between entity and virtual economy, only the difference between the old and the new. If you ignore opportunities, you will inevitably be marginalized or even eliminated. If we can integrate the power of mobile Internet, real-time user data and technology to improve operational efficiency, physical retail enterprises can create brand-new value for consumers.
It is reported that Yintai Commercial is a leading department store chain in China, operating 29 department stores and 17 shopping centers, mainly located in first-and second-tier cities in China. Yintai’s development in Zhejiang Province, where Alibaba Group is headquartered, is particularly strong. The proposed transaction can only be implemented after the customary completion conditions are reached, including the approval of Yintai’s independent shareholders and the Grand Court of Cayman Islands.
Layout "new retail"
More than two years ago, e-commerce strongly impacted physical retail, and Yintai chose to cooperate with Alibaba. In March 2014, Alibaba invested HK$ 5.3 billion in Yintai to become the second largest shareholder. Since then, Shen Guojun, the founder of Yintai Commercial, has continuously transferred shares, eventually making Alibaba the single largest shareholder of Yintai Commercial. On May 19th, 2015, Zhang Yong, CEO of Alibaba, succeeded Shen Guojun as the chairman of Yintai Commercial Board.
Yintai founders Shen Guojun (left) and Ma Yun (right)
Today, the development of e-commerce has ushered in a "ceiling". Ma Yun put forward the concept of "new retail" in October 2016, emphasizing online and offline and logistics integration. Since then, Alibaba has been constantly moving online and offline. In November 2016, Alibaba acquired a 32% stake in Sanjiang Shopping through its subsidiary for 2.15 billion yuan, and realized the layout of the supermarket online. The privatization of Yintai Commerce this time is intended to further strengthen integration and cooperation.