Tencent buys minority stake in Yonghui Stores

China’s Tencent plans to acquire a minority stake – some 5% — in offline Chinese retailer Yonghui Stores, as the tech giant looks to explore a physical retail presence in the domestic market.

Yonghui said in a filing to the Shanghai stock exchange that the share transfer agreement would be made with Linzhi Tencent, a Tencent affiliate. Tencent will also take a 15 per cent stake in Yonghui supply chain and logistics subsidiary Yonghui Yunchuang Technology following further discussions.  The purchasing price was not revealed.

Yonghui, a department store retailer, operates hundreds of stores in mainland China. The acquisition comes at a time when Chinese tech firms are ramping up investments in physical stores.

Rival Alibaba last month took a $2.9 billion stake in leading Chinese grocery chain Sun Art Retail Group Ltd. The move also sees Tencent follow in the likes of JD.com, who is already a stakeholder in Yonghui Stores.

In China, 85 percent of retail sales are still made offline, reported Reuters.

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

Founded in 2001, Yonghui plans to close some 00 supermarkets in around 20 provinces in China. The firm’s major investors include Dairy Farm Group, part of conglomerate Jardine Matheson Group.

Last month, Tencent reported a 57 per cent year-on-year jump in third-quarter operating profit to Rmb22.75bn ($3.43bn), while revenues were up 61 per cent year on year at Rmb65.2bn.