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What Alibaba’s Latest Move Says About China’s Changing Retail Landscape

Intime Lotte department store in Beijing at nightIntime Lotte department store in Beijing at night
The Intime Lotte department store in Beijing at night. Education Images UIG via Getty Images

E-commerce firm Alibaba (BABA) and the founder of Intime Retail (INTIF) have jointly bid to take the Chinese department store operator private for HK$19.79 billion ($2.55 billion), the partners said on Tuesday.

Alibaba Investment Ltd and Shen Guo Jun have offered HK$10 per Intime share. That would represent 42.25 percent more than the stock’s last price of HK$7.03 on Dec. 28 when trading was suspended pending an announcement. The stock price surged 35% when trading resumed on Tuesday.

The Alibaba group currently holds 27.82% of Intime while Shen owns 9.17%. The pair plan to finance the purchase through internal cash resources and external debt financing.

Intime said in a statement to Hong Kong’s stock exchange that Alibaba and Shen planned to explore development opportunities and implement a series of long-term growth strategies, which could affect its short-term growth.

“We don’t divide the world into real or virtual economies, only the old and the new,” said Alibaba CEO Daniel Zhang in a separate statement. “Those who cling on to the old ways of retailing will be disrupted.”

“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,” Zhang said.

China’s retail sector is worth $4.5 trillion and is growing at 10.7% a year, Alibaba said. The e-commerce firm also said it was working with offline retailers to create a new shopping experience.

Alibaba initially took a stake in Intime in 2014 with an investment of $692.25 million.

Intime operates 29 department stores and 17 shopping malls in China, mainly in so-called first- and second-tier cities. In August, it posted a 21.3% fall in first-half profit amid declining sales, saying e-commerce had transformed the competitive landscape.

Its shares fell 8% in 2016, compared with a 0.4% rise in the benchmark Hang Seng Index.

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Separately, Alibaba Executive Chairman Jack Ma met U.S. President-elect Donald Trump on Monday and laid out his firm’s plan to bring a million small U.S. businesses onto its e-commerce platform to sell to Chinese consumers over the next five years.