Deals | Tencent, JD Invests in Wanda’s Shopping Malls for $5.4B, A Second-time Charm?

“The deal represents one of the world’s largest single strategic investments between internet companies and brick-and-mortar commercial giants.”

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Deals | Tencent, JD Invests in Wanda’s Shopping Malls for $5.4B, A Second-time Charm?

Chinese tech conglomerate Tencent is leading a group of investors, including Suning, JD, and Sunac to acquire a 14 percent stake in Wanda Commercial Properties Co. for USD 5.4 billion (RMB 34 billion) as Wang Jianlin, chairman at Wanda Group and once China’s richest man, is steering the group’s commercial property arm away from property development to adopt an “asset-light” operating model and focus on the management of commercial properties.

Following the transaction, Wanda Commercial will be renamed as Wanda Commercial Management Group and looking for a potential refloat.

“The deal represents one of the world’s largest single strategic investments between internet companies and brick-and-mortar commercial giants,” Wanda Group said in an email statement to media.

The rebranded group will combine the online resources from Tencent, etc. and its own vast offline assets to build “a new consumption model in China that will integrate both online and offline services, providing Chinese consumers with a more intelligent and more convenient shopping experience, and generating a win-win situation for both brick-and-mortar businesses and Internet companies.”

A second chance

Image credit to KrASIA.

It’s neither the first time Wanda making a move to partner up with local internet mogul for online-to-offline synergy nor the first time Wanda and Tencent joining hands on such fronts.

On a regular day in September 2014, Wanda’s Wang, Tencent’s Pony Ma, and Baidu’s Robin Li, three of the richest men in China, came together in front of the spotlight, holding hands and smiling to the cameras, announcing an ambitious effort to establish a US$ 789 million joint venture and to amass the trio’s respective strength in online and offline sectors to integrate, and even blur the lines between, its retail properties operations and its online presence.

The ambition faltered in less than 3 years as the joint venture, Wanda Internet Technology Group, was reportedly slashing a majority of its staff last year-end and would be narrowing down its business to merely improve the managerial efficiency of its physical malls.

The second time might not always be a charm.

In an announcement put out last night by Wanda Group pronouncing the deal, it also says that Tencent will push forward with a strategical cooperation between Wanda Internet Technology Group, while Wanda Group is responsible for spearheading the direction of its online-offline integration.

Wanda Commercial is the world’s largest commercial properties operator, with 235 Wanda Plazas across China and an annualized customer traffic of 3.19 billion as of last year. With capital injection from Tencent and Suning, Wanda also hopes to almost quadruple the Plazas number to 1,000 as quickly as possible, also says the announcement.

Tencent will invest RMB 10b (around US$ 1.6b) in Wanda Commercial Properties Co. for a stake of 4.12 percent.

Suning and JD, respectively, are contributing RMB 9.5b (US$ 1.5b) and RMB 5b (US$ 789 million) to the deal.

Tencent’s Fast Foray

Coming late to the new retail scene which is taking China market by storm, Tencent made it up with a quick pace of alliances in spades with physical channels, including this most recent Wanda acquisition.

Last week Tencent signed up a partnership with French retailer Carrefour in a transaction seeing Tencent taking a stake in the French company’s China unit. The two are joining hands on a broad range of areas – “data, smart retail, mobile payment, in-store experience, and data analysis” – in an aim to boost offline store sales and customer traffic with internet-enabled technology provided by Tencent.

Also on-boarded the Carrefour partnership includes China’s fresh food retailing specialist Yonghui, which received USD 636 million from Tencent for 5 percent last December, a deal marks the beginning of Tencent’s sudden foray into new retail.

Image credit to KrASIA.

Chinese internet giants, the likes of Tencent and Alibaba, have been pushing to transform the traditional retailing business by tapping into their technological prowess. Alibaba has struck a series of similar deals with some of the biggest local retailers, including Suning, in an effort to combine e-commerce and mobile payment with traditional shopping.

Retailers, on the other hand, are also navigating the tricky terrain with mixed results, such as the aforementioned Wanda digitization venture.

Writer: Ben Jiang