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TheStreet Open House

Alibaba Invests In Brick-And-Mortar Retailer

NEW YORK (The Deal) -- Chinese e-commerce giant Alibaba Group Holding on Monday agreed to buy up to 25% of listed Chinese department store operator Intime Retail (Group) Company as the line between online and brick-and-mortar shopping blurs.

Alibaba said it would pay HK$1.66 billion ($214 million) for a 9.9% stake in new shares and subscribe to $478 million worth of convertible bonds which, when converted, would give Alibaba a quarter of Intime.

"Although online retail sales still represent less than 10% of all retail spending in China, e-shopping is booming and Alibaba officials have said they expect as a consequence there will be deeper integration between brick-and-mortar stores and the Internet," Alibaba wrote in its corporate blog.

Linking online and real-world presences isn't necessarily new but an established e-commerce group linking up with a department stores operator seems novel.

Alibaba CEO and founder Jack Ma has said he wants to be able to deliver any product anywhere in China within 24 hours. Gaining access to Intime's 36 stores will help him meet this goal.

The department stores will also gain access to Alibaba's broad inventory, improving their buying power.

Alibaba would pay HK$7.5335 per Intime share, a 13.7% discount to the stock's Wednesday close, the last day the shares were traded. Intime shares had been suspended in anticipation of the announcement. After resuming Monday, the stock fell 7.5%, or HK$0.68, to HK$8.35, as investors absorbed the diluting effect of the deal.

Alibaba continued to race to remain abreast of rivals as it prepares for an intial public offering later this year in New York. Last month, the company pitched in $215 million in a $280 million funding round for online messenger TangoME Inc.

Alibaba also said it would increase its 28.7% stake in online content provider ChinaVision Media Group Ltd. to 70% in an HK$6.24 billion agreement. In February, it announced a $1.85 billion takeover agreement for Beijing-based, Nasdaq-listed AutoNavi Holdings Ltd., which offers Internet-based maps and navigation services.

Alibaba is expected to list only a fraction of its shares later this year, though analysts said they expect the sale to raise at least $15 billion. It chose the U.S. after disagreeing with Hong Kong exchange officials on its corporate structure.

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