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Alibaba Grabs Majority Stake in Chinese Supermarket Operator With $3.6 Billion Deal

By Eric Volkman – Updated Oct 20, 2020 at 10:26AM

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The company now owns 72% of the retailer.

Alibaba (BABA -3.11%) is plunging more deeply into the retail sector. The company announced Monday it has reached a deal to pay roughly $3.6 billion to boost its stake in Sun Art, which operates a network of hypermarkets and supermarkets throughout China.

All told, Sun Art's store count is 481 hypermarkets and 3 midsize supermarkets, operating under the RT-Mart and Auchan brands. Crucially, it also has a sprawling distribution network and a clutch of storage facilities that will help Alibaba carve out share in the hotly competitive grocery delivery market in China.

Small model of shopping cart in front of a laptop.

Image source: Getty Images.

Added to its existing Sun Art investments, the latest deal will give Alibaba a nearly 72% stake in the retailer, up from 36%. Alibaba, already a dominant force in the Chinese retail sector, bought its initial stake in Sun Art in late 2017 with a splashy investment totaling around $2.9 billion.

"Over the past three years, Sun Art has made significant progress in the digital transformation under a fast-changing market environment by leveraging resources and technology from the Alibaba ecosystem, to capitalize on the growth opportunities in China's hypermarket and supermarket space," Alibaba wrote in the press release heralding its latest deal.

All of Sun Art's retail stores in China are now integrated into Alibaba's digital platforms. Alibaba says this has allowed the retailer to offer fast, on-demand delivery to its customers.

Alibaba believes the retail sector in its country is still full of potential. Over the past few years, its retail operations have risen to comprise around one-fifth of total revenue in the company's most recently reported quarter.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd. The Motley Fool has a disclosure policy.

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