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Alibaba’s Intime Acquisition Mirrors Amazon’s Physical Store Drive

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Alibaba to take Intime private for $2.6 billion

Alibaba (BABA) is buying China’s department store chain, Intime Retail, for $2.6 billion and making the business private. 

Intime is listed in Hong Kong, and the $1.29 per share that Alibaba is paying for it indicates a 42% premium over its closing price before the news of the sale broke.

Alibaba already owns 28% of Intime, and this additional $2.6 billion investment will boost its stake in the department store chain to 74%. Alibaba is teaming up with Intime’s founder, Shen Guojun, to take the chain private.

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The acquisition will strengthen Alibaba’s push to blur the line between online and offline shopping, enabling vendors to display their merchandise offline and consumers to order items online and pick them up in store. Intime’s portfolio includes 17 shopping malls and 29 department stores. As such, acquiring Intime should support Alibaba’s delivery program at a time when rivals such as JD.com (JD) are trying to woo shoppers with faster delivery services.

E-commerce companies are showing interest in physical stores

Alibaba’s interest in Intime mirrors Amazon’s (AMZN) physical store initiative. The company is planning to open more than 2,000 stores, according to a Wall Street Journal report. For Amazon, the physical store drive is seen as a move to attract more grocery spending and appeal to households who may have shunned online shopping, either due to mistrust or logistical challenges.

Another Wall Street Journal report said that nearly 22 million Americans didn’t shop on Amazon in 2016 for reasons that included being in places where it would be difficult to receive Amazon packages.

As Amazon goes for offline spending, it’s set to clash with traditional retailers Walmart (WMT), Target (TGT), Whole Foods (WFM), and Kroger (KR).

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