Tencent Holdings Ltd (騰訊) is to buy a stake in Chinese supermarket chain Yonghui Superstores Co (永輝超市) for about 4.22 billion yuan (US$639.5 million), setting up a clash with archrival Alibaba Group Holding Ltd (阿里巴巴) in physical retailing.
China’s largest Internet corporation is acquiring about 5 percent of Yonghui from existing shareholders at 8.81 yuan apiece, Yonghui said in an exchange filing on Friday, a 9.9 percent discount to its price before trading was halted on Dec. 8.
The investment — a rare foray into traditional retail for a company known for games and messaging service WeChat (微信) — might be looking to drive adoption of its digital payments service in stores.
The deal follows Alibaba’s US$2.9 billion purchase of a stake in grocery retailer Sun Art Retail Group Ltd (高鑫零售) last month, which operates about 400 hypermarkets under the RT-Mart (大潤發) and Auchan (歐尚) banners.
The e-commerce giant is betting it can use technology to overhaul a US$4 trillion Chinese brick-and-mortar retail industry and drive its next phase of growth.
Yonghui, which has more than 580 stores in China, plans to resume trading today, the filing said.
China’s fourth-biggest hypermarket operator by market share already has a tech-industry investor in e-commerce player JD.com Inc (京東), according to Bloomberg Intelligence.
For Tencent, the investment might help propagate the use of its WeChat Pay service, which has steadily gained market share from Alipay (支付寶), a rival offering from Alibaba-affiliate Ant Financial Services Group (螞蟻金服).
Wider adoption of payments is key to building data on users and helps Tencent and Alibaba better target advertising.
The rapid growth of Tencent’s digital wallet — along with hit games such as Honor of Kings and advertising across its platforms — helped fuel a 61 percent rise in third-quarter sales.
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