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Alibaba Makes Significant Investment into Appliance Manufacturer

Alibaba Group will invest HK$2.82bn (US$455m) in appliance maker Haier Electronics Group in a deal aimed at expanding the Chinese e-commerce giant's logistics reach to the millions of consumers in China’s vast interior.

Online retail is booming in China and market leader Alibaba is seeking to develop Haier’s distribution network for large-sized goods into a logistics platform that will reach lesser developed cities and which other companies can also use.

For Haier, the partnership with China’s biggest e-commerce firm will further its expansion into online retail and logistics, a strategy aimed at giving it an edge in the fierce battle for margins in the world’s biggest appliance market.

Shares in Haier, in which KKR-backed Qingdao Haier owns a 47.8 percent stake, soared 20 percent to their highest in nearly 14 years after the deal was announced. The stock closed up 13 percent on outpacing a 0.3-percent gain in the benchmark Hang Seng Index.

“This collaboration with Haier Group is a win-win-win partnership,” Jack Ma, executive chairman of Alibaba Group, said in a joint statement. China’s vast interior is expected to see rapid retail growth as more people move into urban areas and their spending power increases.

The agreement will see Alibaba acquiring a 9.9-percent stake in Haier’s online marketplace Goodaymart, which under the joint venture, will form the basis of a logistics platform for large-sized goods that can be used by other companies as well.

Alibaba will also buy HK$1.316bn worth of convertible bonds which can either be turned into shares in Hong Kong-listed Haier or a 24.1-percent stake in the joint venture. It will also subscribe to about 2 percent of Haier Electronics’ enlarged share capital for HK$965m, the statement said.

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