In a surprise move, China’s largest hypermarket chain, Sun Art Retail Group, has halted trading on the Hong Kong stock exchange, sparking rumors of a potential merger or acquisition. The company’s shares have plummeted 78% since e-commerce giant Alibaba Group Holding acquired a controlling stake in 2020. Alibaba’s investment was part of its ambitious “new retail” strategy, aimed at integrating online shopping with offline hypermarkets.
With Sun Art’s stock trading at a low of HK$1.79, down from HK$8.1 at the time of Alibaba’s investment, market speculation is rife about a possible sell-off of Alibaba’s stake. Private equity firms, including DCP Capital and Hillhouse Investment, have reportedly expressed interest in acquiring a stake in Sun Art.
Analysts believe a divestment by Alibaba is likely, as the company seeks to refocus on its core e-commerce and cloud computing businesses. “Alibaba holds the majority of Sun Art’s shares, so a change in equity is highly possible,” said Kenny Ng, a strategist at Everbright Securities International.
Sun Art’s struggles, including a 13.3% decline in revenue to 72.6 billion yuan (US$10.3 billion) in the financial year ended March 31, may have contributed to Alibaba’s decision to reassess its investment. The hypermarket chain’s integration with Alibaba’s platforms, including Ele.me and Tmall Supermarket, has been slow due to Covid-19 restrictions and operational challenges.
A potential divestment could signal a shift in Alibaba’s strategic positioning, according to Bai Wenxi, chief economist of China Enterprise Capital Union. As the e-commerce giant continues to consolidate its retail assets, it remains to be seen how Sun Art’s future will unfold.
Leave a Reply