Alibaba is taking a big step into the world of brick and mortar retail launching a bid to take a Chinese department store private. The deal, if approved, will give the ecommerce giant a controlling stake in the retail chain.

Alibaba Investments and the founder of department store Intime have put forward a proposal to to privatize the department store operator for US$2.6 billion.

Alibaba and Shen Guo Jun have offered HK$10 per Intime share, a 42.25 per cent increase over the closing price of HK$7.03 before trading was suspended on December 28, 2016.

Intime is a leading department store chain in China operating 29 department stores and 17 shopping malls, mainly in first- and second-tier cities in China. Alibaba currently owns approximately 28 per cent of the equity interests in Intime. Under the proposed transaction, Alibaba would become the controlling shareholder of Intime and it is expected that its shareholding in the company would increase to approximately 74 per cent.

The deal reflects Alibaba’s push to expand beyond its core ecommerce business. The Chinese internet giant has ambitions to transform conventional retail by leveraging its substantial consumer reach, rich data and technology.

“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, and 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,” said Daniel Zhang, Alibaba Group CEO.

“China’s total retail sector is a US$4.5 trillion economy and is growing at 10.7 per cent a year. Alibaba is working with offline retailers to transform conventional approach, create new consumer shopping experience and use actions to embrace future opportunities under the new retail model.”

The proposed transaction is subject to customary closing conditions, including approval from Intime’s independent shareholders and the sanction of the Grand Court of the Cayman Islands.

In 2015 Alibaba made a big investment in physical retail, spending US$4.6 billion for a 20 per cent stake in Suning Commerce Group which operates a network of electronics stores in China.

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