Investing.com-- Shares of China's Sun Art Retail Group (HK:6808) slumped on Thursday, a day after Alibaba Group (NYSE:BABA) (HK:9988) announced it will sell its majority stake in the hypermarket chain to Chinese private equity firm DCP Capital for HK$12.30 billion ($1.58 billion).
Alibaba will sell its 78.7% stake in Sun Art it held via its subsidiaries, a Hong Kong Stock Exchange filing showed on Wednesday.
Hong Kong-listed Sun Art shares fell more than 30% to as low as HK$1.6 on Thursday, while Alibaba shares were 1.1% lower.
Alibaba acquired its controlling stake in Sun Art for $3.6 billion in 2020, aiming to integrate its digital expertise with the chain’s extensive network of hypermarkets across China.
The sale price of $1.58 billion is significantly below the purchase price and comes as part of Alibaba’s strategy to streamline its business operations and focus more on its core e-commerce activities.
"The Disposal is considered to be a good opportunity for Alibaba Group to monetize its non-core assets and to utilize such proceeds to better focus on the development of its core businesses and enhance its shareholder return," the company said in a statement.
Alongside the Sun Art divestiture, Alibaba is also offloading its Chinese department store unit, Intime, despite anticipating a $1.3 billion loss financial loss from the deal.
Last month, Alibaba unveiled plans to merge its domestic and international e-commerce platforms into a unified business unit under a single leadership, aiming to streamline operations amidst increasing competition from budget-focused retailers both domestically and internationally.
"The proceeds from the Disposal are currently intended to be used by our Company for business developments, shareholder returns and general corporate purposes," Alibaba said in a statement.