China’s largest consumer internet platform’s proposed price is more than double an earlier bid from Sun Art Retail, according to people familiar with the matter. Sun Art, a former Alibaba affiliate that’s now backed by private equity firm DCP Capital, had proposed a takeover at $600 million, the people said, asking not to be identified because the sale process is confidential.
Alibaba’s proposal emerged just months after Meituan announced a $717 million acquisition of Dingdong Fresh Holding Ltd., after beating out rival bidders.
Alibaba’s offer underscores its determination to prevail in an intensifying battle between three giants of Chinese online commerce. The rising valuations reflect fierce competition for scarce retail assets, as Alibaba, Meituan and JD.com Inc. step up efforts to dominate local commerce and fresh produce, among the few remaining consumer segments that remain under-penetrated online.
Fujian-based Pupu is among the last independent online grocery companies in China yet to be acquired. China’s grocery platforms have engaged in years of subsidy-driven price wars, pressuring margins and perpetuating “involution” — the destructive competition Beijing is now seeking to reduce.
While consolidation may help curb price wars, it also risks concentrating market power in the hands of a few dominant platforms, potentially conflicting with Beijing’s goal of fostering more competition. Meituan’s proposed acquisition of Dingdong is awaiting approval from antitrust regulators. A Pupu sale to an industry leader may also draw Beijing’s attention.
A representative for Alibaba didn’t reply to a request for comment. DCP declined to comment and a Pupu representative declined to comment.
Meituan’s shares slid as much as 3.1% in Hong Kong on Friday, while Alibaba gained as much as 3.5%.
Market fight
Consolidation removes weaker players and reduces fragmentation, but the escalating bids may signal a shift away from profitability and back toward market-share competition, said Charu Chanana, chief investment strategist at Saxo Markets.
“It tells us Alibaba is serious about local commerce again — but it also tells us the China e-commerce profit pool may remain contested for longer,” Chanana said.
Major internet companies have historically relied on cash-burning strategies to acquire customers, subsidizing products and services, squeezing rivals and forcing many smaller competitors out of the market. Once they disappear, dominant platforms gain greater leverage over merchants, suppliers and consumers.
Chinese e-commerce giants’ price war has been weighing on stocks. Shares of Alibaba, JD.com dropped in Hong Kong after China’s market watchdog reprimanded the firms for what it said were misleading sales promotions.
Privately held Pupu is one of China’s leading instant grocery retail platforms, generating annual revenue of more than RMB 30 billion. The company operates primarily through a 30-minute delivery network covering around 10 cities across four provinces: Fujian, Guangdong, Sichuan and Hubei.