Alibaba Group Holdings BABA.N9988.HK said on Monday it will invest $3.6 billion to boost its stake in hypermarket operator Sun Art Retail Group Ltd 6808.HK, gaining further ground in China's retail market.
The e-commerce giant is hoping to further leverage its digital presence to support Sun Art's 481 hypermarkets and three mid-size supermarkets in China. The move comes as Alibaba steadily expands its presence in China's offline retail sector, as growth in traditional e-commerce slows.
Alibaba, which already owned 21% of Sun Art through a unit, will raise its stake to around 72% through the acquisition of a similar stake in A-RT Retail Holdings, who owns 51% of Sun Art.
The company is taking the stake from Auchan Retail International S.A, the French multinational that launched two of China's largest supermarket chains.
"As the Covid-19 pandemic is accelerating the digitalisation of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience," Alibaba Chairman and Chief Executive Officer Daniel Zhang said in a statement.
Alibaba added that Peter Huang would be appointed chairman of Sun Art on top of his current role as chief executive officer.
Shares of Sun Art soared more than 20% at the open on Monday after Alibaba made the announcement.
Alibaba has expanded outlets across China for Freshippo, a supermarket chain that doubles as an online delivery service. Alibaba operates 214 Freshippo outlets as of its most recent earnings report.
It also has worked with mom-and-pop convenience store owners to offer technology and data analytics services.
Alibaba's e-commerce rivals in China have made similar forays into brick-and-mortar retail.
Online retailer JD.Com Inc 9618.HK runs a brick-and-mortar grocery store called 7Fresh.
Pinduoduo Inc PDD.O, the fast-growing e-commerce site known for budget deals on bulk purchases, bought a stake in home-appliance retailer Gome Retail Holdings Inc 0493.HK in August for $200 million.
The deal also marks another retreat of a major overseas retailer from China's ultra-competitive market.
In 2019 French hypermarket chain Carrefour sold an 80% stake in its China division to electronics retailer Suning.com Co Ltd 002024.SZ.