Alibaba Group Holding Limited BABA has tied up with Intime Retail Group Co Ltd founder, Shen Guojun, in a 2.6-billion bid to privatize Intime.
For the last one year, the stock has outperformed the Zacks Internet Commerce industry. It has returned 35.47% compared with the industry’s return of 25.98%.
The pair offered HK$10 or $1.29 per Intime share, representing a premium of roughly 53.59%, over the average closing price of Intime shares, over the last 60 days, and 42.25% over Intime’s Dec 28 closing price of HK$7.03. This team plans to finance the transaction with internal cash resources and external debt financing.
Intime is a departmental store chain in China and runs 29 departmental stores and 17 shopping malls, across first- and second-tier cities of the country. Alibaba presently holds 27.82% of stake in the company, with Shen holding 9.17%. Alibaba’s stake is expected to go up to 74%, upon completion of the proposed transaction, making it the controlling shareholder.
Alibaba Group Holding Limited Net Income (TTM)
Is Alibaba Following Amazon?
With this move, it appears that Alibaba is steering its business into the brick-and-mortar stores, just like Amazon AMZN. It will utilize Intime’s physical store space to sell its online brands, while Intime’s suppliers will get Alibaba’s platform to sell their products online.
Amazon already entered into the brick-and-mortar space with books, in 2016, and is treading the same path with other merchandise as well, targeting the considerably wide customer base that still prefers to shop at physical stores. Amazon Bookstore integrates the advantages of offline and online pruchase.
Last year, Alibaba invested $4.6 billion in electronics retailer – Suning Commerce Group Co Ltd – in a bid to integrate online and offline shopping. Both the companies have also accelerated push in to other areas such as cloud computing, logistics and online video.
We note that every industry matures and falls, and giants like Alibaba and Amazon seem to be gearing up well in advance, in case the online retail industry ever fazes out.
It would be interesting to see if the transaction, in any way, helps the creation of 1 million U.S. jobs, which Alibaba Founder and Chairman – Jack Ma – mentioned about, after his meeting with the president-elect Donald Trump yesterday.
Zacks Rank and Key Picks
Currently, Alibaba is a Zacks Rank #3 (Hold) stock. Stocks worth considering in the broader technology sector, include NVIDIA Corporation NVDA and Daktronics Inc. DAKT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For the current year, estimates for Daktronics and NVIDIA have jumped by 45.5% and 30.6%, respectively.
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