Alibaba Invests RMB 4.36B in Furniture Mall Operator Red Star Macalline

Alibaba has made another deal aimed at China’s traditional shopping sector, with the e-commerce giant announcing an investment in China’s largest retailer of furniture and home products, as the tech giant, continues to look for ways to leverage its online power and cash resources in offline commerce.

Jack Ma’s tech hegemon this past week purchased RMB 4.36 billion ($630.6 million) of convertible bonds issued by Red Star Macalline Holding Group Company, the privately held holding firm which holds a controlling stake in a chain of 364 home furnishing malls in 199 mainland cities, according to a notice published on the Stock Exchange of Hong Kong on 16 May.

The investment in the Warburg Pincus-backed retail firm, together with related deal for shares in its Hong Kong-listed entity, could pave the way for Alibaba to hold nearly 14 percent of Red Star Macalline.

That stake would make it the second-largest owner of China’s biggest home furnishing group, and follows investments by the e-commerce giant in the grocery and hypermarket retail segments in recent years.

Should Alibaba’s bonds all be converted at their face value of RMB 12.28 per share, the deal would translate into the tech company taking ownership of approximately 355 million shares in Red Star Macalline Group Corporation Ltd, or around a 10 percent stake in the Shanghai-listed unit of the home furnishing chain, based on its current capitalisation of 3.55 billion shares.

After the sale, Warburg Pincus would continue to be the largest shareholder in Red Star Macalline Group Corporation Ltd, having first invested in the company through a 2007 commitment of more than RMB 1 billion, with the US private equity giant currently holding 19.5 percent of the retail chain’s Hong Kong-listed shares, market sources show.

Red Star Macalline Group Corporation declared 2018 revenues of over RMB 14.2 billion and net profit of RMB 4.47 billion, according to its annual report.

Ref: Property Report