By Ben Marmor, Vincent Daly, Kaiona Wagatsuma, Nathaniel Baker (Cornell University); Ben Preece, Lukas Ehrlich, Joe Taylor, Annant Bhargava (University of St. Andrews)
Photo: AI (ChatGPT)
Overview of the deal
Acquirer: DCP Capital
Target: Sun Art Retail Group
Implied Equity Value: US$2.16 bn
Total Transaction Size: US$1.7 bn (for the 78.7% stake)
Closed Date: January 1, 2025
Acquirer Advisor(s): Deutsche Bank (Financial); Sullivan & Cromwell (Legal)
Target Advisor(s): Slaughter and May, Fangda Partners, JunHe (Legal)
On January 1, 2025, DCP Capital—a Beijing-based private equity firm—finalized a deal to acquire a 78.7% stake in Sun Art Retail Group from Alibaba Group for approximately US$1.7 billion. Alibaba had originally purchased its controlling interest in Sun Art for US$3.6 billion in 2020 as part of a strategy to integrate online and offline retail. However, amid shifting consumer behavior, a slowing Chinese economy, and intensifying competition from emerging rivals such as Pinduoduo and Douyin, Alibaba has decided to streamline operations by focusing on its core e-commerce businesses.
For DCP Capital, Sun Art’s extensive hypermarket presence across China offers the potential to capitalize on stable revenue streams and scale efficiencies. DCP has indicated plans to delist Sun Art from the Hong Kong Stock Exchange and conduct a strategic review of the hypermarket operator’s operations, signalling a possible restructuring to align Sun Art more closely with evolving market demands. Alibaba, meanwhile, expects to record a divestment loss of US$1.8 billion on the sale. Overall, this transaction represents a significant realignment of both firms’ strategies: Alibaba shedding non-essential assets to shore up its core competencies, and DCP Capital is poised to shape Sun Art into a more agile and resilient retail platform.
"We are excited to be involved in the complete cycle of Alibaba’s investment in Sun Art... The Transaction involves interesting features that are unprecedented and we are pleased to have helped the client overcome challenging legal and regulatory requirements to arrive at the signing of the deal." - Benita Yu, Lead Partner, Slaughter and May
Company Details (Acquirer - DCP Capital)
DCP Capital is a private equity investment firm founded in 2017 and headquartered in Beijing, China. Under the leadership of CEO Julian Juul Wolhardt—who boasts over 25 years of investment experience—DCP has developed a reputation for deep sector expertise, particularly in Greater China. The firm’s investment portfolio covers a wide range of industries, from retail and consumer goods to healthcare and biotechnology.
With significant experience in consumer-oriented investments, DCP Capital focuses on creating long-term value by combining financial support with strategic insights and an active management style. Previous successes include investments in sectors such as dairy, insurance, consumer electronics, and retail, reflecting the firm’s breadth of market knowledge and capacity to navigate China’s complex economic landscape.
Founded: 2017
Headquarters: Beijing, China
CEO: Julian Juul Wolhardt
Number of employees: ~50
Market Cap: N/A (privately held)
Enterprise Value (EV): Undisclosed
LTM Revenue: Undisclosed
LTM EBITDA: Undisclosed
Recent Transactions: Acquired Sun Art Retail Group (Jan 2025), Invested in GoWit (Jan 2024), Invested in Sun Valley Food (Jun 2023)
Company Details (Target - Sun Art Retail Group Limited)
Sun Art Retail Group Limited is a Chinese investment holding company operating brick-and-mortar stores and online sales channels under the RT-Mart, RT-Super and M-Club brands. A leader in the market, Sun Art operates 466 hypermarkets, 30 superstores and six membership stores, covering 206 cities across 29 provinces in China. As of March 2021, Alibaba’s Taobao China Holding Limited holds a 78.7% stake in the firm, making it the ultimate controlling shareholder of the group. Traded in the HK stock exchange, Sun Art Retail Group Limited is currently trading at $1.65 HKD.
Founded in 1998, headquartered in Shanghai, China
CEO: Hui Shen
Number of employees: 85,778
Market Cap: $2.02bn (as of 13/02/2025)
Enterprise Value (EV): $1.20bn (as of 13/02/2025)
LTM Revenue: $9.93bn
LTM EBITDA: $267.05m
LTM EV/Revenue: x0.13
LTM EV/EBITDA: X2.79
Recent Transactions: PCSB Financial Corporation (2022), Bancorp Rhode Island, Inc. (2011)
Projections and Assumptions
Short-Term Consequences
Immediately following the acquisition, both Sun Art and DCP Capital will experience notable shifts. First, DCP’s plan to delist Sun Art from the Hong Kong Stock Exchange indicates a focus on internal restructuring. This delisting could allow management to pursue strategic changes with fewer public-market pressures, potentially streamlining decision-making around store formats, merchandise offerings, and digital integration.
On the operational side, DCP Capital’s involvement may lead to realignment of Sun Art’s leadership team. In the short run, this can translate to both opportunity and uncertainty for employees, who may see the introduction of new performance metrics, process improvements, or expansions in logistical infrastructure. Additionally, DCP might invest in optimizing supply chains and renegotiating supplier contracts, pursuing economies of scale to drive down costs. These immediate moves could enhance profitability, provided they are executed smoothly.
From a market perspective, analysts will watch how Sun Art navigates its transition under private equity ownership. Shareholders who formerly relied on Alibaba’s robust e-commerce network may question whether Sun Art can maintain or improve store traffic and brand loyalty. Nonetheless, consumers may benefit from upgraded in-store experiences, diverse product lines, and potential online/offline collaborations (possibly with third-party platforms) spurred by fresh capital infusion. Overall, the first year is likely to revolve around restructuring, cost optimization, and reinforcing Sun Art’s position in a competitive retail environment.
Long-Term Upsides
The main upsides in DCP Capital’s acquisition of Sun Art Retail focus on reducing the drag Alibaba put on the business, improving its core operations and the broader economy. All three offer the chance for a turnaround with the new owner.
I) Reducing Alibaba’s technology drag:
Under Alibaba's ownership, Sun Art underwent significant technological integration. These initiatives often did not align with Sun Art's traditional hypermarket model, leading to operational inefficiencies, thus the new strategic realignment is expected to streamline operations, reduce unnecessary expenditures, and ultimately improve profitability.
II) Reinforcement of In-Store Shopping Experience:
Sun Art's strength lies in its extensive network of physical stores across China. With DCP at the helm, there can be a renewed emphasis on enhancing the in-store shopping experience. DCP's leadership team has a proven track record of investing in leading companies with strong operational efficiency such as Belle International (largest women's sportswear retailer in China) and Haier Appliances (home appliance manufacturer), enabling Sun Art to implement relevant strategies. While DCP's current portfolio does not include other hypermarket companies, their extensive experience in consumer goods suggests they can effectively drive improvements in Sun Art's core brick-and-mortar business, solidifying its market position.
III) Capitalizing on Sectoral Growth Amid Economic Stimulus:
Despite recent economic challenges, China's retail sector is set for growth, with projections indicating an increase of up to 5% in retail spending for 2025. This optimistic outlook is bolstered by government initiatives, such as expanded consumer trade-in schemes and subsidies aimed at stimulating domestic consumption. Sun Art, with its established market presence, is well-positioned to benefit from these policies. Aligning business strategies with governmental economic stimuli, Sun Art can tap into the anticipated rise in consumer spending, thereby enhancing its financial performance and market share.
Risks and Uncertainties
This deal presents several key risks and uncertainties that could impact the success of the transaction. Alibaba’s decision to sell the group at a loss of ~$1.8 billion raises questions about the financial health and long-term viability of the group. The move to sell suggests Alibaba sees challenges for Sun Group, potentially due to declining profitability, challenges in digital transformation and weak operation efficiency.
These internal risks are compounded by the pressures faced externally in the rapidly changing Chinese retail sector. E-commerce and online services continue to erode market share from traditional hypermarkets, and Sun Art has struggled to fully adapt.
DCP will need a clear strategy to overcome these risks and uncertainties, and modernize Sun Art’s presence by increasing omnichannel offerings to prevent further challenges.