January 24, 2019 / 5:02 AM / 7 months ago

Alibaba-backed Easyhome to float new retail unit in $5.7 billion reverse merger

SHANGHAI (Reuters) - Alibaba-backed home improvement chain Easyhome will take its new retail arm public via a deal worth up to $5.65 billion with a Chinese state-backed listed retail conglomerate, showed stock exchange statements published late on Thursday.

Wuhan Zhongshang Commercial Group Co Ltd 000785.SZ in a statement said it would buy Easyhome New Retail by issuing 6 billion shares priced at 6.18 yuan each.

This could value the unit at 36.3 billion yuan to 38.3 billion yuan ($5.35 billion to $5.65 billion) and result in a so-called backdoor listing on the Shenzhen bourse.

Easyhome will become the listed firm’s controlling shareholder after the deal, while Alibaba Group Holding Ltd (BABA.N) and 22 other investors including Sequoia Capital LLP’s Chinese investment venture and Taikang Life, will also own stakes, Wuhan Zhongshang said.

Shares in Wuhan Zhongshang rose by their maximum allowed 10 percent to a two-month high after the announcement.

Easyhome started operations in 1999 and is now China’s second-biggest home improvement supplies and furniture chain operator.

Its new retail unit runs a digital platform which allows customers to buy items and order services, and which is currently linked to 284 Easyhome stores. The platform was developed with the help of Alibaba, which bought 15 percent of the company in February for $865 million.

State-backed Wuhan Zhongshang runs malls and supermarkets in 10 cities across central China’s Hubei province.

Easyhome and Alibaba did not immediately respond to requests for further comment.

Alibaba has been on a multi-billion dollar drive to extend its dominance of online shopping into physical stores, and build data fingerprints for every consumer in China, where 85 percent of retail sales are still made offline.

Besides Easyhome, the technology giant has also acquired major stakes in big-box retailer Suning Commerce Group Co Ltd (002024.SZ) as well as Lianhua Supermarket Holdings Co Ltd (0980.HK) and Intime Retail Group Co Ltd INTIF.PK.

Reporting by Brenda Goh; Additional Reporting by Josh Horwitz; Editing by Christopher Cushing

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