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Alibaba taking 18% stake in Lianhua Supermarket

Chinese e-commerce giant Alibaba Group Holding Ltd. agreed to buy an 18% stake in Lianhua Supermarket Holdings Co. Ltd., making it the second-largest shareholder of the Chinese supermarket operator.

Hong Kong-listed Lianhua announced May 29 that shareholder Shanghai Yiguo E-commerce Co. Ltd. agreed to transfer 201,528,000 domestic shares in the company to Alibaba unit Alibaba (China) Technology Co. Ltd.

Lianhua's state-owned parent, Shanghai Bailian (Group) Co. Ltd., also agreed to buy 22,392,000 domestic shares, or about 2% of Lianhua, from Shanghai Yiguo.

The deal value was not disclosed, and the transactions are subject to regulatory approval.

Alibaba's investment follows a strategic partnership it established in February with Bailian Group, one of China's largest retail conglomerates with about 4,700 outlets in 200 cities across the country.

At that time, the companies said they aimed to leverage each other's user data to integrate offline stores, merchandise, logistics and payments to boost efficiency.

Bailian subsidiary Lianhua operates supermarkets, hypermarkets and convenience stores. As of the end of 2016, it had more than 3,600 stores across China's 19 provinces, mostly in Shanghai.

In 2016, Lianhua recorded a loss of 450.0 million Chinese yuan, compared with a loss of 497.0 million yuan in 2015.

The supermarket operator said in its 2016 annual report that it faced various challenges such as a slowdown in economic growth and changing consumer behavior.

As of May 26, US$1 was equivalent to 6.86 Chinese yuan.