Alibaba Group Holding Ltd (NYSE: BABA) will sign its first big deal after paying the record-breaking antitrust fine for the abolition in Jack Ma’s internet territory. The e-commerce emperor and the Jiangsu government will sign a deal where they plan to buy retail arm stakes from Suning Conglomerate owned by Zhang Jingdong, one of the billionaires in China.
After a Break-down
This deal will add 20% to Alibaba’s existing stake in Suning groups, costing around $8 billion. This is potentially great comeback for the company after officials charged them with $2.8 billion fine for anti-monopoly violations back in April. This led to Alibaba groups’ first loss in the past nine years.
This new deal with the local government will help the biggest retailer overpower rival JD.com, a stronghold in the electronics industry.
Who are Regulators?
Whenever a new deal is processed, the State administration has to admit it for Market regulations. However, these regulators only fined a grand fee from Alibaba, saying their past investment with Intime Group was not accurately informed.
Suning Group’s Stance
So the new big deal Alibaba hopes for, we can expect an announcement later this week, says the people who don’t want to be named. And there is still a chance for this deal to be delayed or canceled.
Suning’s owner, Zhang, will no longer have control over the company if the deal happens. People say it will become the end of his era, an entrepreneur who leads vast businesses, including a soccer team Inter Milan. This fuels concerns over the Suning group’s liquidity.
Suning has an immense retail presence all over China, especially in the eastern parts of Shanghai. In hypermarkets, they own a 4.4% share which is the fifth-largest share nationwide according to Euromonitor international in 2020. First is, obviously, Alibaba with 13.7% share.
Alibaba and Suning Group have been allies for a very long time. They partnered in many businesses starting from logistics to Online Sales. Back in 2015, Alibaba bought a 20% share from Suning for $4.6 billion; in return, they paid $2.3 million to purchase a 1.1% stake in a big company that ended up nothing. Ever since Suning collapsed with a 60% stake and Alibaba’s doubled.
Final Words
The excellent strategy behind this take on is Alibaba overthrowing rival JD.Com Inc (NASDAQ: JD). They already own 20% in Suning; an increased stake will give them a higher hand in consumer electronics in online sales, taking down JD, the rivals.
