Suning to receive $4.63b investment from Alibaba

Alibaba Group is looking to extend its retail presence as it plans to sink $4.63 billion into local retail chain Suning, in a deal which would see the latter return the favour by investing $2.2 billion into Alibaba.
Written by Asha Barbaschow, Contributor

Chinese giant Alibaba Group has entered into a strategic alliance with consumer electronics retailer Suning Commerce Group, in a deal which would see Alibaba claim a 19.99 percent stake in the traditional retail company for $4.63 billion.

If Suning shareholders approve the deal, Suning will, in return, invest up to $2.2 billion to gain up to 27.8 million newly issued ordinary shares of Alibaba, which would give Suning approximately 1.1 percent interest in Alibaba.

"Over the past two decades, e-commerce has become an inextricable part of the lives of Chinese consumers," Alibaba's executive chairman Jack Ma said. "This new alliance brings forth a new commerce model that fully integrates online and offline,"

Previously a bricks and mortar retailer, Suning will open its first online store on Alibaba's Tmall.com platform. Also as a result of the deal, Suning will become a partner of Alibaba's logistics affiliate, Cainiao, with the partnership said to cover distribution to almost all of the 2,800 counties and districts in China.

"This alliance will benefit consumers and merchants by cultivating an open and transparent integrated ecosystem that will be the backbone of the future economy," Ma said.

With over 1,600 physical retail stores in 289 cities across China, Suning's chairman Zhang Jindong said that the collaboration between the two companies is a milestone in the Chinese retail industry.

"Its influence on e-commerce and offline retailing will be enormous. This collaboration signals a new trend in the Internet age, strengthening China's traditional industries by leveraging the power of internet. It will also help transform China's manufacturing industry and broaden the global horizons of Chinese brands," Jindong said.

In 2014, Alibaba invested $248.88 million for a 10.35 percent stake in Singapore's telecommunications and postal service, SingPost. Just last month, the e-commerce giant increased its stake to 66 percent following a $206.45 million investment.

It has been less than a year since Alibaba took the title of largest IPO.

Following its listing, Alibaba pumped $600 million into Travice Inc, the Chinese operator of taxi app Kuaidi Dache in January this year, and only days later, the e-commerce giant snapped up an undisclosed stake in AdChina, an online marketing firm, in order to boost its advertising portfolio.

Bolstering its mobile hardware presence, Alibaba then took a $590 million minority stake in home-grown smartphone manufacturer, Meizu.

At the start of the year, Alibaba also launched a HK$1 billion startup fund for young Hong Kong entrepreneurs, in a move which Ma said at the time was aimed at strengthening economic ties between Hong Kong and mainland China.

A few months later, the Chinese online retailer announced it would pump $318 million into a startup fund for neighbouring Taiwan. The program is expected to be launched before Christmas this year, however Alibaba said its establishment remains subject to regulatory requirements and the local authorities' approval.

In June, Alibaba invested $194 million for an undisclosed stake in China Business News, a local financial media firm that produces both TV programs and newspapers; and also sank $118 million into Softbank Robotics Holdings, preparing for what Ma has labelled the 'Fourth Industrial Revolution'.

Alibaba is also taking on Amazon's AWS cloud platform, announcing late last month that it has set aside $1 billion to drive growth in its own cloud business, Aliyun. The e-commerce company currently operates five data centres in China and Hong Kong, and in March this year opened its first facility outside its domestic market in Silicon Valley.

Part of its $1 billion investment will be channelled toward building new data centres in Singapore, Japan, the Middle East, and Europe.

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