China’s Alibaba Group Holding Ltd agreed to invest $692 million in a Chinese department store operator as the e-commerce giant looks to bring the benefits and convenience of online shopping to customers who visit real bricks-and-mortar stores.
Alibaba, whose businesses will come under investor scrutiny ahead of the group’s planned mega IPO in the United States this year, said it will buy $214 million worth of shares in Hong Kong-listed Intime Retail (Group) Co Ltd.
It also agreed to acquire $478 million of convertible bonds, which would give Alibaba a 26.1 percent stake in the department store operator once the bonds are converted into shares in three years.
Intime will issue 220.54 million shares at HK$7.5335 each and HK$3.71 billion worth of convertible bonds to a unit of Alibaba, the department store operator said in a filing to the Hong Kong stock exchange on Monday.
As part of the investment, Alibaba and Intime will form a joint venture to develop online-to-offline, or O2O, business in shopping malls, department stores and supermarkets in China. Alibaba will own about 80 percent of the venture, with Intime controlling the rest.
O2O businesses seek to benefit from the meteoric rise of smartphone use in China and can help turn a search into a shopping trip or meal based on the user’s location.
Shares in Intime surged as much as 17 percent shortly after the market open on Monday, following a trend of Hong Kong-listed companies whose shares gained sharply after receiving investments from Alibaba.
The gains were short-lived, with Intime reversing course and losing as much as 11.4 percent by mid-morning as investors digested details of the purchase, in which Alibaba offered to buy the stock at a 13.7 percent discount to its last traded price on March 26.
Read more at Reuters.