Walmart Increases Stake in Chinese Online Retailer JD.com

By | October 6, 2016

A securities filing by American retail giant Walmart indicates it has almost doubled its stake in the Chinese e-retailer JD.com as part of its drive to penetrate the market in the Asian country.

Walmart revealed in a filing with the Securities and Exchange Commission on Wednesday that it had increased its stake in JD to around 10.8 percent. This represents a significant increase on the stake it already controlled in the second-largest Chinese online retailer.

In June, the U.S. retailer had acquired about 5.9 percent stake in JD after selling its Chinese e-commerce marketplace, Yihaodian, to the company.

Walmart

Sources familiar with the deal told the Wall Street Journal that it could confer observer status on Walmart at JD’s board meetings. The only strategic partner of the leading Asian retailer that maintains a seat on its board at the moment is Tencent Holdings Ltd, a very popular social networking company in China which owns the WeChat messaging platform.

Foreign retailers such as Walmart have not had it easy cracking into China, a country whose e-commerce market has grown to become the largest in the world with domestic companies like Alibaba and JD dominating. The U.S. retailer would hope the linkup with one of the largest online retailers in the highly populous Asian country can help with its long-term strategy there.

“This stepped-up investment in JD has been part of our plan, as we continue to be a passive investor,” Walmart spokesperson Jo Warner said in an email statement. “We believe this strategic alliance will help us grow e-commerce even faster in China.”

Online retail spending in China hit $589 billion in 2015, according to Cambridge, Massachusetts-based market research firm Forrester Research. That amount was significantly larger than the $334 billion recorded in the U.S.

JD is second only to Alibaba in the Chinese e-commerce space in terms of gross merchandise volume. The company’s stock price gained more than five percent in after-hours trading following news that Walmart had increased its stake in it. The price stood at more than $29.50 around 6:30 p.m. in New York on Wednesday. It has been on a rise since the Yihaodian online grocery marketplace was acquired by the Chinese retailer in June.

The stake obtained by Walmart in the earlier deal with JD was valued at around $1.5 billion. The value of its stake in the company has now risen above $7.8 billion, according to Forbes.

It was reported at the end of September that Walmart was in talks to invest in India’s largest e-commerce company, Flipkart Online Services Pvt. The largest American retailer was supposedly considering an investment of between $750 million and $1 billion in the ecommerce business which started in 2007.

However, no concrete deal has come out of the reported Flipkart talks so far.

The second half of this year has been a somewhat busy one for Walmart. It bought the online retail startup Jet.com for $3.3 billion in August.

Walmart shares have gained about 17 percent in 2016. Price dropped to $71.67 per share on Wednesday, but later added eight cents in after-hours trading, according to the WSJ.

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