Chinese e-commerce giant Alibaba Group Holding Ltd is in talks with Germany's Metro about taking a stake in the German retailer's China operations, three sources told Reuters on Thursday.
Metro and Alibaba declined to comment.
The talks are at an early stage and could still fall apart, the sources said.
Alibaba's interest comes as rival Tencent last year signed a partnership deal with France's Carrefour.
Restructuring Measures
Once a sprawling retail conglomerate, Metro has been restructuring in recent years to focus on its core cash-and-carry business, selling Kaufhof department stores and then splitting from consumer electronics group Ceconomy .
It is also trying to offload its loss-making Real hypermarkets chain, saying on Tuesday that the sale is progressing.
"Initial excitement about a bid premium will soon be replaced by worries about hollowing out the business and removing one of the few paths for sustainable growth," said Bernstein analyst Bruno Monteyn.
Presence In China
Metro has 95 stores in China and real estate assets in major centres, such as Beijing and Shanghai, one of the sources said.
Metro chief executive Olaf Koch has said the German firm was reviewing potential partnerships with local players in China.
Metro and Alibaba have already partnered in online retail in China.
'Growing Continually'
"We are growing continually and we are profitable there," Koch said on Tuesday when Metro presented first-quarter earnings.
Metro reported that same store sales in Asia rose a currency adjusted 7% to €1.04 billion euros ($1.17 billion) in the October to December quarter.
The possible China move comes as Czech investor Daniel Kretinsky is preparing a potential bid for Metro, people close to the matter told Reuters last month.
Global Commerce (EPGC), a vehicle co-owned by Kretinsky and Slovak investor Patrik Tkac, is expected to have the financing and other arrangements in place to be able to announce a tender offer for Metro as early as March, the people added.
