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Alibaba shops for hypermarket chain Sun Art in $3.6 billion deal

·2-min read
A logo of Alibaba Group is seen at the company's headquarters in Hangzhou
A logo of Alibaba Group is seen at the company's headquarters in Hangzhou

(Reuters) - Alibaba Group Holdings <BABA.N> <9988.HK> said on Monday it will invest $3.6 billion (2.78 billion pounds) to acquire a controlling 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.

"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 27% by lunchtime 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.

(Reporting by Nikhil Kurian Nainan in Bengaluru and Josh Horwitz in Shanghai; Editing by Stephen Coates)