HONG KONG (Reuters) - China’s e-commerce giant Alibaba Group Holding Ltd (BABA.N) plans to invest 2.1 billion yuan ($305 million) in supermarket chain Sanjiang Shopping Club Co Ltd (601116.SS) to further expand its retail presence.
Sanjiang said announcements it had made about Alibaba’s investment had prompted the Shanghai stock exchange to ask whether Alibaba will ultimately seek control. Sanjiang’s shares were suspended on Nov. 8 and will resume trading on Nov. 21.
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 percent 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 another 9.3 percent stake for 438.6 million yuan via a share transfer, Sanjiang said.
Alibaba’s stake in Sanjiang will rise to 32 percent after the share transfer and share subscription, Sanjiang said. This is above the 30 percent 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.
In early November, Alibaba posted a 55 percent 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.