Alibaba wants to transform the retail sector with a US$2.6 billion buyout that it says will break down the barriers between offline and online.
The Chinese e-commerce giant said its investment unit was working with Intime Retail's founder, Shen Guo Jun, to take the department store chain private with a projected HK$19.8 billion (US$2.6 billion). The funds would be raised through internal cash and external debt financing.
The two parties would offer HK$10 per share, estimated to be 53.59 percent more than the average closing price of Intime shares over the past two months and 42.25 percent more than its closing price on December 28, 2016. The retailer is listed on the Hong Kong Stock Exchange.
Intime operates 29 stores in 17 shopping malls across China, located primarily in first- and second-tier cities. Alibaba currently owns 28 percent of the retailer's shares, while Shen holds 9.17 percent.
Under the proposed deal, the e-commerce operator would take a controlling stake of Intime, holding an estimated 74 percent share.
The initiative underscored Alibaba's plans to "transform conventional retail" by tapping data and technology to improve customer reach, it said. It added that the wide adoption of mobile phones had blurred the lines between online and offline consumer shopping experience, where e-commerce now could be accessed anywhere, anytime.
This had pushed Alibaba to work with brick-and-mortar retailers to integrate online and offline customer data, improve in-store experience, and enhance inventory efficiency and sales turnover. In the quarter ended September 2016, mobile accounted for 78 percent of the gross merchandise volume on its China retail marketplaces and mobile monthly active users topped 450 million.
According to Alibaba Group CEO Daniel Zhang, the Chinese retail industry was worth US$4.5 trillion and growing at 10.7 percent a year and the company was working to "create new consumer shopping experience" and operate under a new retail model.
Zhang said: "We don't divide the world into real or virtual economies, only the old and the new. Those who cling on to the old ways of retailing will be disrupted. Brick-and-mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency.
"Our combination with Intime will enable us to tap into the long-term growth potential of a new form of retail in China powered by internet technology and data," he added.
The proposed deal would be subject to the usual regulatory requirements, including approval from Intime's independent shareholders and the Grand Court of the Cayman Islands.
At last year's Singles Day online shopping bonanza, Zhang also stressed the need to merge the offline and online worlds. "When we look at the entire landscape, only 10 percent of China's total retail is online. Every form of retail in China is trying to find a digital transformation," he said.
"At the end of this, online and offline...should be fully integrated."
Alibaba had worked with 80,000 physical stores in the days leading up to the Chinese online shopping festival, with the aim to bridge online-to-offline communications. It helped merchants establish digital connections through membership programmes and better manage their inventory, it said.