Tencent Holdings Ltd., Asia's largest Internet company by market value, will spend HK$1.5 billion ($193 million) to buy a stake in China South City Holdings Ltd. 

Tencent will pay HK$2.2 for each of the 680.3 million new shares, or about 9.9 percent, of China South City, the Shenzhen-based company said in an e-mailed statement today. The offer is 1.4 percent higher than China South City’s closing price on Jan. 13. The share was halted for trading yesterday.

The Internet company will use China South City's logistics and trade center network to compete against e-commerce giant Alibaba Group Holding Ltd. for China’s 608 million Internet users who spend more money online. Tencent said it’s also working with China South City to help small-to-medium sized companies migrate their business online.

"Tencent will probably use this investment to expand its e-commerce business using China South City's logistics network," said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. "Tencent is trying to play catch up with Alibaba."

The two companies will also work on integrating online and offline retail businesses, according to the statement.

(Bloomberg)