PARIS — The world’s largest travel-retail and e-commerce operators, Dufry Group and Alibaba Group, respectively, have agreed to join forces to form a strategic joint venture in China. Simultaneously, Alibaba plans to make up to a 9.99 percent investment in Dufry.
“We highly value this partnership with Alibaba Group to for a strategic joint venture to explore growth opportunities and develop the travel-retail business in China,” Julian Diaz, Dufry Group chief executive officer, said in a statement on Monday. “We expect this collaboration to drive growth in Asia and with the Chinese customers worldwide with the support of new digital technologies.”
Travel retail has been the channel hardest hit by the coronavirus pandemic, as people were confined to their homes, flights were grounded and airports closed for months.
What had been a channel posting double-digit gains in many parts of the world, driven by the Chinese consumer, it is now expected to register sales declines of 60 to 70 percent this year versus 2019 levels, according to estimates from Generation Research.
Today, domestic travel in China is the only bright spot on the map for travel-retail operators and luxury brands, so all sights are trained on that market and how to grow business there.
Alibaba Group has more than 800 million customers in China, while Dufry counts more than 2,500 shops in 65 countries.
“By fostering existing and new business models in offline and online travel retail, we are convinced the joint venture will capitalize on growth opportunities and will support Dufry to become the leading digital travel-retail company worldwide,” Diaz said.
Alibaba and Dufry have agreed to collaborate to jointly explore and invest in opportunities in China to develop the travel-retail business and enhance Dufry’s digital development. The two groups are to incorporate a joint venture owned 51 percent by Alibaba, with the remainder held by Dufry.
Dufry will propose at its extraordinary general meeting on Oct. 6 the issuance of up to 25 million shares, which could result in an issue size of about 700 million Swiss francs, or $764 million.
On Sept. 10, Basel, Switzerland-based Dufry secured a commitment from funds managed by Advent International Corp. to purchase shares at 28.50 francs per share up to a maximum investment of 415 million francs. That is to be automatically increased by 20 percent of any amount by which the gross proceeds from the offer exceed 500 million francs, to a maximum investment of 455 million francs.
The proceeds of 700 million francs would be used to finance the remaining interest in Hudson Ltd. and for general corporate purposes, Dufry said.
Alibaba plans to invest at the same share price as Advent up to a maximum of 9.99 percent in Dufry, but no more than 250 million francs.
Dufry entered China in 2008 and operates duty-paid shops in the Shanghai and Chengdu airports. It’s also present in Hong Kong and Macau.
In June, Dufry announced a global restructuring program to help allay the consequences of the COVID-19 pandemic. The program aimed to reduce personnel expenses by 20 percent to 25 percent between June and October, taking into account the different possibilities of full-year sales declines, which could run from 40 percent to 70 percent, as announced on May 12.
That day, Dufry said its sales in April, in reported terms, declined 94.1 percent due to widespread travel restrictions.