China's Tencent plans retail push with Yonghui Superstores stake

Chinese tech giant Tencent Holdings Ltd plans to buy a 5 percent stake in Yonghui Superstores Co Ltd, the department store operator said on Monday, in the latest push by China’s internet giants into offline retail.

The investment, which will be made through Tencent affiliate Linzhi Tencent Technology, will also see the firm take a 15 percent stake in Yonghui’s supply chain and logistics subsidiary via a capital increase, the retailer said.

The deal follows a major push by Tencent rival Alibaba Group Holding Ltd into brick-and-mortar retail, including taking a $2.9 billion stake in top Chinese grocery chain Sun Art Retail Group Ltd last month.

Details of the deal, including price and stake sellers, remain under discussion, Yonghui added in a filing to the Shanghai bourse. Yonghui’s market cap was 93.6 billion yuan ($14.14 billion) when its shares were suspended on Friday.

Tencent was not immediately available for comment outside of normal business hours.

Trading in Yonghui’s stock will remain suspended after being halted on Friday when the firm’s shares jumped the daily limit of 10 percent on media reports of Tencent’s investment.

The move by Tencent takes it into closer competition with rival Alibaba, which is looking to extend its grip over online commerce into physical stores. In China, 85 percent of retail sales are still made offline.

In the past couple of years, Alibaba has spent over $10 billion for major stakes in big-box retailer Suning Commerce Group Co Ltd, Lianhua Supermarket Holdings Co Ltd (0980.HK) and Intime Retail Group Co Ltd.

Yonghui, founded in 2001, says it has close to 600 supermarkets in around 20 provinces in China. The firm’s major investors include Dairy Farm Group, part of conglomerate Jardine Matheson Group.

($1 = 6.6175 Chinese yuan renminbi)