Daniel Zhang, chief executive of Alibaba, said: "Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalised services in the digital economy".
Sun Art operates the RT-Mart and Auchan hypermarket chains in China, with a footprint of 446 stores in 224 cities, according to its website.
Alibaba noted in a press release that this alliance is part of its New Retail push.
The online giant has invested more than $9.3bn in bricks and mortar stores since 2015, according to Reuters.
The deal would give French retailer Groupe Auchan, China's Alibaba and Taiwanese conglomerate Ruentex 36.18 per cent, 36.16 per cent and 4.67 per cent stakes respectively in Sun Art. Alibaba would replace Ruentex as the second-largest shareholder.
As part of an alliance with Auchan Retail S.A. [AUCH.UL] and Ruentex Group, Alibaba would buy the stake from Ruentex while Auchan Retail would boost its stake, the three companies said in a joint statement. Notably, offline retail now constitutes 85% of total retail sales in China despite the enormous growth of e-commerce over the last few years. "By fully integrating online and physical channels together with our partners, we look forward to delivering an original and delightful shopping experience to Chinese consumers". In January, it led a bid to take department store chain Intime Retail Group private for up to HK$19.8 billion. Wal-Mart and JD.com are doing the same, marrying online commerce with data and combining their network of warehouses and cold storage for same-day delivery to customers.
Alibaba is now the world's largest e-commerce company.
Data from Kantar Worldpanel shows that Sun Art now holds an 8.2% market share in the grocery segment.
But decelerating growth and narrowing margins may be why Alibaba's getting into Sun Art for about $6.50 (Hong Kong dollars, about $1.06 Canadian) a share versus $8.60 ($1.41 Canadian) before shares were suspended November 13. The plunge took place following the announcement of the Alibaba deal. Ruentex's share of Sun Art will fall to about 4.7% after the transaction.
Peter Huang, vice chairman of Ruentex Group, said Sun Art Retail is making efforts to "move from offline to online" as consumer demands have changed "tremendously" in recent years with the rapid growth of mobile internet.