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UPDATE 4-Alibaba shops for hypermarket chain Sun Art in $3.6 bln deal

* Alibaba to increase stake from 21% to 72%

* Shares of Sun Art in Hong Kong up more than 27%

* E-commerce firms continue expansion into offline retail (Updates share price)

Oct 19 (Reuters) - Alibaba Group Holdings said on Monday it will invest $3.6 billion to acquire a controlling stake in hypermarket operator Sun Art Retail Group Ltd, gaining further ground in China’s retail market.

The e-commerce giant is hoping to further leverage its digital presence to support Sun Art’s 481 hypermarkets and three mid-size supermarkets in China. The move comes as Alibaba steadily expands its presence in China’s offline retail sector, as growth in traditional e-commerce slows.

Alibaba, which already owned 21% of Sun Art through a unit, will raise its stake to around 72% through the acquisition of a similar stake in A-RT Retail Holdings, who owns 51% of Sun Art.

“As the COVID-19 pandemic is accelerating the digitalisation of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience,” Alibaba Chairman and Chief Executive Officer Daniel Zhang said in a statement.

Alibaba added that Peter Huang would be appointed chairman of Sun Art on top of his current role as chief executive officer.

Shares of Sun Art soared more than 27% by lunchtime on Monday after Alibaba made the announcement.

Alibaba has expanded outlets across China for Freshippo, a supermarket chain that doubles as an online delivery service. Alibaba operates 214 Freshippo outlets as of its most recent earnings report.

It also has worked with mom-and-pop convenience store owners to offer technology and data analytics services.

Alibaba’s e-commerce rivals in China have made similar forays into brick-and-mortar retail.

Online retailer JD.Com Inc runs a brick-and-mortar grocery store called 7Fresh.

Pinduoduo Inc, the fast-growing e-commerce site known for budget deals on bulk purchases, bought a stake in home-appliance retailer Gome Retail Holdings Inc in August for $200 million. (Reporting by Nikhil Kurian Nainan in Bengaluru and Josh Horwitz in Shanghai; Editing by Stephen Coates)

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