Alibaba’s RT-Mart Exit Accelerates Amid Buyout Offer

Alibaba Group Holding Ltd.'s Sun Art Retail Group, which operates the supermarket chain RT-Mart, has received a privatization offer, marking Alibaba's effort to divest from its offline retail assets. This announcement caused Sun Art Retail's shares to jump by over 15% after the company confirmed interest from a potential buyer, causing investors to keenly focus on the potential sale as sensitive information was released following a trading suspension. [para. 1][para. 2] The latest share increase brought Sun Art’s market value to HK$19.9 billion, showing a significant decline from its high of HK$110 billion in 2020. While the buyer remains unnamed, potential acquirers reportedly include private equity firms Hillhouse Capital Group Holdings and DCP Capital, both of which have engaged with Sun Art and Alibaba but have offered no comments. [para. 3][para. 4]

Alibaba, holding 78.7% of Sun Art, is refocusing on e-commerce and cloud computing by dialing back its offline retail efforts, including the consideration of selling assets like RT-Mart and Freshippo, despite previous rumors involving state investors being denied. Discussions with potential buyers and Sun Art’s 5.04% stakeholder, New Retail Strategic Opportunities Investments 1 Ltd., continue without final agreements. [para. 5][para. 6][para. 7] RT-Mart, founded in 1996, entered the Chinese mainland in 1997 and eventually became the largest retailer with a market share of 8.2%. However, a struggle with profitability saw the company project around 150 million to 200 million yuan in profits for the first half of fiscal 2025 after a significant loss the previous year, attributed to sales growth and cost efficiencies. [para. 8][para. 9]

Alibaba initially invested in Sun Art Retail in 2017, enhancing their digital presence and online integration, culminating in a majority stake by 2020 with investments totaling 47 billion yuan. Still, by 2023, Alibaba signaled a strategic shift away from physical retail operations to concentrate on core competencies in technology, acknowledging market challenges. CFO Xu Hong noted that without ventures like RT-Mart, Alibaba’s revenue could have been 8% higher, with an improved EBITA margin. [para. 10][para. 11][para. 12] Despite attempts to integrate RT-Mart into the digital ecosystem, profitability issues persisted, evidenced by a loss swing in 2022 and temporary gains in 2023 achieved through layoffs. The company continued to struggle in 2024, posting further revenue decline and losses, prompting leadership change with seasoned executive Shen Hui stepping in to drive a turnaround, though acknowledging past missteps. [para. 13][para. 14][para. 15][para. 16]

Hillhouse Capital, founded in 2005 and managing $45.87 billion, stands out for its investments in prominent Chinese internet companies and consumer brands. Noteworthy privatization deals include a record HK$53.1 billion buyout of Belle International and participation in GLP's privatization. Meanwhile, DCP Capital, founded in 2017 by former KKR and Morgan Stanley executives, focuses on Chinese consumer markets with investments in well-known brands like China Mengniu Dairy. [para. 17][para. 18][para. 19]