China-based retailer Better Life Commercial Chain Share Co. Ltd. has agreed on Friday to sell a piece of its stake to multinational conglomerate Tencent Holdings Ltd. and e-commerce group JD.com Inc.
The supermarket and department store operator said that it would sell a 6 percent stake to Tencent’s subsidiary for CN¥886.9 million ($140 million), while JD.com’s affiliate will be purchasing 5 percent for CN¥739.1 million ($117 million).
Overall, Better Life would be selling an 11 percent stake for CN¥1.63 billion ($257 million), raising its value to CN¥17.11 per share, compared with their closing price of CN¥19.01 on January 19.
The company’s shares, which have been suspended since January 22, is set to resume trading on Monday.
Better Life will also team up with Tencent and JD.com to work towards smart and borderless retailing, as well as to create a digitized ecosystem.
The three companies and stakes’ existing shareholders settled the deal on February 14.
Better Life earlier this month has already entered a strategic partnership with Tencent.
In 2016, Better Life generated CN¥37 billion ($5.84 billion) in revenue from its 592 physical stores in China. It was also able to employ more than 60,000 people at that time.
Tech Giants Eye Chinese Retail Companies
The agreement came as Chinese tech giants, including Tencent and major online retailer Alibaba Group Holding Ltd., are on a retail investment spree.
Since the start of 2017, the two companies, which are worth a combined $1 trillion, have been spending over $10 billion on retail-focused transactions. The agreements have helped both parties expand reach online and in brick-and-mortar stores.
Tech companies have been aiming for physical chains in China, as they account for about 85 percent of retail sales.
Market research firm general manager Jason Yu stated that that is what Alibaba, JD.com, and Tencent want a piece of, since that is the largest part of the business where they can actually seek future growth.
In exchange, brick-and-mortar-stores can then gain access to payment systems, logistic networks, and other services.
Tencent, who also has a major stake in JD.com, has been adding more allies to keep up with Alibaba. This included French retailer Carrefour S.A, who recently stated a potential investment from the Shenzhen-based company and US retail group Walmart Inc.
Furthermore, Tencent has purchased a stake in supermarket company Yonghui Superstores Co. Ltd., clothing merchants Vipshop Holdings Ltd. and Heilan Home Co. Ltd., as well as mall operator Wanda Commercial Properties Co.
Jason Ding, a partner at a major consultancy firm stated that Tencent does not directly profit from retail, but rather it is about additional data the company can obtain.
Analyst Jialong Shi also said that Chinese retailer have also been turning to advanced technologies for progress, producing a big market for the conglomerate to present its research in cloud computing, computer vision and artificial intelligence (AI).
Shi added that new retail is the biggest application picture for cloud computing, and that Tencent wants to be a tech service provider and for any cloud operator, it is big business opportunity.
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