Key take-outs
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In major breaking news, Dufry and Alibaba Group have agreed to form a strategic joint venture in China. As a result, Alibaba Group plans an equity investment in Dufry with a target ownership of up to 9.99% of the post-offering share capital.
The partnership brings together a Chinese digital powerhouse with the world’s leading travel retailer by sales in 2019. The Alibaba digital economy generated RMB7,053 billion (US$1 trillion) in GMV in the 12 months ended 31 March. That was mainly driven by RMB6,589 billion (US$945 billion) in GMV transacted through its China retail marketplaces, plus GMV transacted through international retail marketplaces and local consumer services.
Dufry Group CEO Julián Díaz commented: “We highly value this partnership with Alibaba Group to form a strategic joint venture to explore growth opportunities and develop the travel retail business in China. We expect this collaboration to drive growth in Asia and with Chinese customers worldwide with the support of new digital technologies.
“Alibaba Group is a leader in digital commerce with an ecosystem of more than 800 million consumers in China. Dufry holds a leading position in travel retail globally and brings in its strong operational expertise in 65 countries and over 2,500 shops.
“By fostering existing and new business models in offline and online travel retail, we are convinced the joint venture will capitalise on growth opportunities and will support Dufry to become the leading digital travel retail company worldwide. We aim to better serve our customers and provide them anywhere with global products, services and personalised offers across all platforms and devices.”
[Watch out for updates as we examine the repercussions of this key sector development. Julián Díaz will be delivering a keynote interview at the Moodie Davitt Virtual Travel Retail Expo next week, where Alibaba will also be presenting.]
The deal in detail
Alibaba Group and Dufry AG (Dufry) said that the collaboration will jointly explore and invest in opportunities in China. The alliance will develop the travel retail business and enhance Dufry’s digital transformation.
The parties will incorporate a joint venture owned 51% by Alibaba Group and 49% by Dufry. Alibaba will bring in its established network in China and its digital capabilities. Dufry will contribute to the JV its existing travel retail business in China, and will support the partnership with its supply chain and strong operational skills.
In connection with this collaboration, Alibaba Group will invest in Dufry up to a maximum of 9.99% of the post-offering share capital and will participate in its ordinary capital increase. This is subject to approval of Dufry’s shareholders at the upcoming EGM tomorrow 6 October.
As announced on 10 September, Dufry has already secured a commitment from funds managed by Advent International Corporation or its affiliates to purchase shares at CHF28.50 per share up to a maximum investment amount of CHF415 million (to be automatically increased by an amount equal to 20% of any amount by which the gross proceeds from the offering exceed CHF 500 million, up to a maximum investment amount of CHF 455 million).
With the additional commitment by Alibaba Group, Dufry proposes to the EGM the issuance of up to 25 million fully paid-in registered shares, which would result in potential gross proceeds of approximately CHF700 million.
The envisaged proceeds are planned to be used to finance the previously announced acquisition of all remaining equity interest in Hudson Ltd. in the US and for general corporate purposes. These may include the set-up and operations of the JV with Alibaba Group to pursue growth opportunities in China and to accelerate Dufry’s digital transformation.
The shares to be newly issued and offered in the approximately CHF 700 million rights offering (‘the offered shares’) will in first priority be made available to existing shareholders, subject to certain legal limitations based on residency. The rights will not be tradable, but are transferable.
Offered Shares not taken up by existing shareholders (‘the rump shares’) will in first priority be offered to Advent International up to its committed investment amount and in second priority to Alibaba Group.
Alibaba Group plans to invest, at the same price per share as Advent International, up to a maximum of 9.99% of the post-offering share capital in Dufry, but no more than CHF250 million (or such higher amount as agreed by Alibaba Group).
Alibaba’s commitment is subject to an allocation of at least 8.5% of Dufry’s post-offering share capital and other customary conditions. Any Rump Shares not purchased by Advent International or Alibaba Group will be offered to the market by way of a public offering in Switzerland and private placements in certain jurisdictions outside Switzerland in compliance with applicable securities laws (the ‘International Offering’).
Boosting Dufry’s China focus
The partnership with Alibaba Group is in line with Dufry’s growth strategy focusing on the Asian markets and builds on the company’s existing and long-dated footprint in China, the travel retailer noted. Dufry first started to operate travel retail businesses in China in 2008.
Today, Dufry manages duty paid shops in Shanghai Hongqiao International and Chengdu Shuangliu International airports, and its Chinese presence extends to Hong Kong and Macau. Dufry is also seeking to expand its digital offerings including store and staff digitalisation, pre- and post-travel online services, digital customer engagement and online presence inside and outside of the airport as well as data analytics and digitalization of operations.
Dufry is extending the deadline to give voting instructions to the independent proxy for the EGM to 5 October 2020, 6pm CEST, through www.netvote.ch
Investors voting through instructions to their banks must submit instructions by 12 noon CEST. Please see voting instructions here.
