Alibaba To Pick Up Nearly 10% Stake In Dufry With $763M Investment

Alibaba Group Holding Ltd BABA has agreed to acquire up to a 9.99% stake in Switzerland-based travel retailer Dufry AG DUFRY, the latter said in a statement Monday.

What Happened: The investment will be made through a rights issue that will rake in $763 million — higher than the $545 million Dufry had hoped to raise prior to Alibaba’s commitment.

Alibaba is paying CHF 28.50 ($31.05) per share — the same rate that Advent International Corporation is paying to invest CHF 415 million ($452.10 million) in the retailer.

Dufry said that the proceeds of the investments would be used to acquire the remaining equity of the New Jersey-based airport facilities provider Hudson Ltd HUD, as well as, for general corporate purposes.

The Jack Ma-co-founded group and the Swiss retailer are also forming a joint venture to explore China's travel retail business and to enhance Dufry’s digital transformation. 

The joint venture will be 51% owned by Alibaba Group and 49% by Dufry.

Why It Matters: Dufry first entered the Chinese market in 2008 and is present in Hong Kong and Macau as well, the company said.

In August, Hudson had entered into an agreement to sell all its remaining equity at $7.70 in cash to Dufry. 

Upon completion of the agreement, Hudson would operate as a wholly-owned subsidiary and will be delisted from the New York Stock Exchange. 

Gil Luria, director of research at D.A. Davidson, said last week that Alibaba needs to expand beyond China and Southeast Asia, where it faces saturation.

Price Action: Alibaba shares closed 0.65% lower at $288.17 on Friday and fell nearly 0.4% in the after-hours session. On the same-day, Dufry OTC shares closed almost 3.4% lower at $2.99.

Photo courtesy: N509FZ via Wikimedia