Wal-Mart Invests More on China's JD.com

By Czarina Ara Lasco

Oct 07, 2016 06:00 AM EDT

In a regulatory filing with the Securities and Exchange Commission late Wednesday, Wal-Mart said that it has increased its stake in JD.com to 10.8 per cent from 5.9 per cent stake it obtained after selling its Yihaodian online marketplace to JD in June, including the brand and the app.

In the busy 2016, this deal is the newest for Walmart. It is the period highlighted by its $3.3 billion acquisition of e-commerce startup Jet.com in August. JD's stock surged more than 5.5% in after-hours trading following the disclosure and at a share price of $29.52 at 6:27 p.m. in New York, Walmart's stake in the company was worth more than $7.8 billion.

Considering that the deal is lucrative and increasingly challenging all at the same time, Wal-Mart, the world's largest retailer, is trying to improve its business in China. Wal-Mart's business has been slow and uneven for the past few quarters. It operates more than 400 stores despite entering the country 20 years ago. It sees bolstering its online business as the future in China. The reason was unclear when Walmart bought more shares in JD, whose stock has surged since late June when Walmart transferred its Yihaodian operations to the company. In that deal, Walmart handed Yihaodian, an online grocery marketplace to JD, and the companies consolidated their supply chains. At the time, Walmart's 5% stake in JD was worth around $1.5 billion.

JD is China's second-largest e-commerce player by gross merchandise volume behind Alibaba. The company is backed by Tencent, China's dominant social networking company and the owner of popular messaging platform WeChat.

Wal-Mart's global online sales rose 11.8 per cent in the second quarter. That's up from the 7 per cent pace of the first quarter but still far weaker than the 20 per cent increases from less than two years ago.

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