HONG KONG • China's e-commerce giant Alibaba Group Holding plans to invest 2.1 billion yuan (S$435 million) in supermarket chain Sanjiang Shopping Club to further expand its retail presence, picking up a slice of the regional Chinese discount supermarket chain with more than a million members.
Shares of Sanjiang - suspended on Nov 8 - resumed trading yesterday and surged by its daily 10 per cent limit, giving the Ningbo-based company a market value of about US$830 million (S$1.2 billion).
Sanjiang said its announcements about Alibaba's investment had prompted the Shanghai stock exchange to ask whether Alibaba will ultimately seek control.
Under the terms of the deal outlined in the stock exchange filings, Alibaba will subscribe to a private placement in Sanjiang, which will help raise up to 1.5 billion yuan and be equivalent to a 25 per cent stake in the supermarket operator.
Sanjiang also plans to issue up to 188 million yuan worth of exchangeable bonds to Alibaba, equivalent to 16.4 million of the supermarket operator's shares. Alibaba will also acquire a further 9.3 per cent stake for 438.6 million yuan via a share transfer, Sanjiang said.
Alibaba's stake in Sanjiang will rise to 32 per cent after the share transfer and share subscription, Sanjiang said. This is above the 30 per cent threshold where a company is required to make a full takeover bid in China.
Alibaba does not plan on any more stake purchases in the next 12 months. The convertible bonds can be converted to Sanjiang shares six months after issuance. Alibaba's stake in Sanjiang will rise to 32 per cent after the share transfer and share subscription, Sanjiang said. This is above the 30 per cent threshold where a company is required to make a full takeover bid in China.
Alibaba will need approval from Sanjiang's shareholders to waive this requirement.
Sanjiang said it aims to use Alibaba's e-commerce platform to make the most of the increasingly competitive bricks-and-mortar retail sector as China's economic growth slows.
The deal marks Alibaba's latest acquisition of physical retail, as it tries to revamp traditional offline and online models.
Billionaire co-founder Jack Ma's goal is to replace distributors and middlemen and let stores buy directly from suppliers based on real- time demand and inventory.
Sanjiang operates about 160 stores scattered across the prosperous eastern province of Zhejiang.
Alibaba has invested in physical retail - including in Suning Commerce Group and Intime Retail Group - to flesh out its online shopping offerings, open up new sales channels and improve its logistics network.
Earlier this month, Alibaba posted a 55 per cent rise in second-quarter revenue, logging a second straight quarter of robust results, indicating that it could still generate strong growth despite worries about the health of China's economy and its retail sector.