This week, Chinese online shopping giant Alibaba detailed its plans to purchase a 10% stake in Dufry. The Swiss company is the largest global operator of duty-free shops at airports, holding over 2,500 sites worldwide. Dufry is looking for emergency funding of around CHF 700m after a 70% drop in sales this year. This is as a result of the impact of the pandemic.
Alibaba To Create New Joint Venture
Alibaba will collaborate with Advent International, a private equity group to underwrite a rights issue that will be offered to Dufy shareholders this week. Advent had said last month that it would purchase CHF 455 million worth of shares issued in the capital increase not taken up by current shareholders.
Alibaba has said that it will purchase shares at the same price CHF 28.5 a share for a total of CHF 250 million. The terms of the deal also include a commitment by Dufry to create a new joint venture with Alibaba in China.
Commenting on the deal, Dufry released a statement this week with CEO Julian Diaz saying:
“We are convinced the joint venture will capitalize on growth opportunities and will support Dufry to become the leading digital travel retail company worldwide.” In turn, Alibaba said the new partnership would “serve to meet the growing consumer demand for international brands in China”.
Alibaba Moving Beyond Recent Challenges
Given the challenges it has faced recently, the deal is a big step for Alibaba. Challenges have included the geopolitical tensions which the Chinese tech sector has become embroiled in. With many countries banning Chinese 5G networks and the US banning the use of certain Chinese Apps, Alibaba’s outlook has been clouded.
Solid Q2 Earnings Beat
Following a solid Q2 earnings report with revenues rising to $241 million from $174 million in the same quarter last year. The group reported second-quarter earnings per share of $1.45. This was a rise from $1.09 in the same quarter last year. Shares in Alibaba have recovered firmly off the year’s lows and are now trading back up near all-time highs.
Alibaba Trading Back Near Highs
Shares in Alibaba continue to rally within the bullish channel which has framed the move off the year’s lows. Price recently found support at a retest of the 265.73 level. This came following the correction from 298.58 highs.
Subsequently, price has rallied back up to just under those highs. Focus remains on an eventual break higher and a continuation of the bullish move.