The dawn of the year 2025 marked a significant turn of events in the retail landscape of China as the secret behind the ownership of RT-Mart’s parent company, Sun Art Retail Group, has finally been unveiledOn the evening of January 1st, Alibaba Group, renowned for its extensive influence in the e-commerce domain, made headlines by disclosing that its subsidiaries, in collaboration with New Retail, have entered into a definitive transaction agreement with D.EShaw Group.

This landmark agreement stipulates that Alibaba will sell its 78.7% stake in Sun Art Retail, amounting to a staggering maximum total of approximately HK$ 13.138 billion – a move that has taken market analysts by surpriseAlibaba's strategic transition underscores a pivotal moment in its ambitious but challenging journey in the retail sector.

Reflecting back, Alibaba had initially invested over HK$ 50 billion into Sun Art during its acquisition

Back in November 2017, Alibaba committed HK$ 22.4 billion to acquire a substantial 36.16% stake directly and indirectlyJust three years later, in 2020, another investment of HK$ 28 billion further solidified its controlling interest in the company, ensuring Sun Art was fully integrated into Alibaba’s financial statements.

Before this decisive agreement, speculation surrounding the sale of Sun Art had circulated for quite some timeIn March 2024, rumors suggested that various retail assets, including RT-Mart and Hema, could be acquired by other market giants such as China Resources or COFCO, though these affirmations were promptly dismissed by all parties involvedIn October 2024, Sun Art publicly acknowledged that potential buyers had expressed interest in acquiring stakes in the company, igniting chatter that Hillhouse Capital and D.EShaw could be contenders for the takeover.

Ultimately, all speculation has settled, and D.E

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Shaw has secured ownership of Sun Art RetailThis aligns with Alibaba’s recent pattern of sloughing off non-core assets, reminiscent of its previous divestiture of Intime RetailHaving entered the Chinese market in the late 1990s, RT-Mart has developed into a key player in China's hypermarket landscape, merging with Auchan in 2011 and subsequently becoming the country’s largest retailer, surpassing giants such as Walmart and Carrefour.

As of September 30, 2024, Sun Art operates a diverse portfolio of formats, operating 466 hypermarkets, 30 mid-size supermarkets, and 6 membership storesIn terms of geographical distribution, according to financial reports, approximately 6.4% of Sun Art's hypermarkets and supermarkets serve first-tier cities, while 18.1% are located in second-tier cities, with a notable 48.6% situated in third-tier cities, and the remaining in fourth and fifth-tier cities.

Sun Art Retail, once lauded as one of Alibaba’s most prized assets under its New Retail strategy, was seen as a vital part of Alibaba’s future

When Jack Ma introduced the New Retail concept at an Alibaba conference in October 2016, the company was reaping rewards with reported revenues exceeding 100 billion yuan that same yearHowever, expectations eventually gave way to challenges as the retail landscape in China underwent tremendous shifts.

Alibaba’s ambitions for Sun Art came crashing down on several occasionsBy March 2018, then-CEO Daniel Zhang expressed his conviction that their partnership with Sun Art could radically reshape the entire retail sector within ChinaNonetheless, external market pressures and internal restructuring needs eventually pushed Alibaba to reevaluate its position.

As of the first day of 2025, Alibaba remains the largest shareholder of Sun Art through its fully-owned subsidiary, Jixin Holdings, and Taobao China, holding an indirect stake of approximately 73.66%. New Retail, which is an investment company fully owned by Alibaba, holds about 5.04% of shares in Sun Art, allowing Alibaba to maintain significant influence over its investment decisions.

According to the agreement, D.E

Shaw will make an acquisition at a maximum price of HK$ 1.75 per share, including cash and interest, bringing the total received by Alibaba and its subsidiaries to around HK$ 13.138 billionD.EShaw Capital, a global private equity firm focusing on the Asian market, is helmed by Liu Haifeng, a former co-head of KKR’s private equity investments in Asia, bringing substantial experience to the table.

In a broader context, Alibaba's ongoing divestiture strategy signals a strategic shift away from the ambitious New Retail ventures it once championedThe recent sale of Intime Retail’s astonishing valuation of billions of yuan reinforced this narrativeAlibaba is shedding its ties to assets that pose burdens while prioritizing liquidity and core business focus.

Just weeks before the sale of Sun Art, Alibaba confirmed a substantial divestiture of Intime Retail for HK$ 7.4 billion, anticipating considerable financial repercussions from the asset’s disposal

At the time, Alibaba mentioned the rationale behind this disinvestment would be to convert non-core assets into cash and concentrate more on the core aspects of their business, thereby enhancing shareholder returns.

The shift in strategy aligns closely with sentiments from the leadership following the appointment of new CEO Wuyongming in September 2023, where he outlined the intention to restructure businesses around user-centered and AI-driven prioritiesThis strategic realignment has resulted in a concentrated focus on e-commerce and cloud computing, while proactively divesting from non-essential sectors.

Following this realignment, Alibaba engaged in multiple equity transfer agreements, transitioning stakes of various firms including furniture retailer Meituan and logistics giants into new handsEach transaction aimed at enhancing operational efficiency and allowing independent growth of non-core businesses.

Looking ahead to February 2024, Chairman Joe Tsai revealed that offloading non-core assets was progressing efficiently, with Alibaba successfully divesting $1.7 billion worth of such assets over the previous nine months

He noted that considerable traditional retail operations still linger within Alibaba’s portfolio, but emphasized that exiting these businesses was a logical step even though the current market conditions necessitated a patient approach.

Tsai’s comments resonated throughout the industry, signaling a fundamental shift away from the boldly postulated New Retail strategy that characterized the Jack Ma era.

Interestingly, Alibaba is not alone in this trend; several competitors, including JD.com, have also been selling off their offline retail assetsIn September 2024, Miniso announced the acquisition of shares from Yonghui Supermarket, cementing a broader trend of consolidation and re-evaluation within China's retail sectorWith marketplace dynamics fluctuating rapidly, businesses must adapt to remain competitive.