Alibaba Takes Big Step Offline With $2.6 Billion Intime Deal

Alibaba Takes Big Step Offline With $2.6 Billion Intime Deal
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Alibaba is leading a bid to take department store chain Intime Retail for as much as $2.6 billion, as China’s largest online retailer deepens its integration with brick-and-mortar stores, according to Bloomberg. The deal to buy out Intime adds to Alibaba’s burgeoning foothold in physical retail as it pursues growth beyond a slowing online business. Control of Intime will also allow the e-commerce giant to explore ways to modernize a $4.5 trillion industry that hasn’t adapted well to the growing popularity of online shopping.

Jack Ma’s goal is to try and up-end a splintered and bloated Chinese retail landscape, stripping out layers of middlemen to reduce costs and improve efficiency. Apart from Intime, Alibaba has partnered with electronics chains Suning and Haier in deals that expanded its own online offerings and sales and delivery network. “This deal shows that there is still value to brick-and-mortar stores, enough to interest e-commerce players,“ said Catherine Lim, a Singapore-based analyst at Bloomberg Intelligence. “What it’s shown is that department store chains are still relevant and of value. We could be seeing renewal of a sunset industry.“

Alibaba and Intime’s founder Shen Guojun will pay HK$10 apiece for the Intime shares they don’t already own, a deal that will require as much as HK$19.8 billion ($2.55 billion) including stock options. That’s a 42 percent premium over Intime’s previous close. Alibaba, which will own almost three-quarters of Intime, is paying a premium for a company that’s seen revenue shrink since the second half of 2015. The offer values Intime at about 18.7 times Ebitda of 1.39 billion yuan ($201 million) for the 12 months ended June 2016, the latest period available.

By teaming up with physical retailers, Alibaba hopes to pioneer a new model of online and offline retail. It sees an opportunity in helping Chinese retailers use technology to transform inventory management, while securing a physical network through which it can get goods to its own customers more efficiently, for instance via letting customers pick up orders from physical stores. Ma has said that he sees “tremendous challenges“ for pure e-commerce operators as the country’s economy slows.