(Bloomberg) —

Alibaba Group Holding Ltd. is poised to make its first major investment since it paid a record antitrust fine as part of a bruising crackdown on Jack Ma’s internet empire.

A consortium led by the e-commerce giant and the Jiangsu provincial government is nearing a deal to buy a stake in the retail arm of Chinese billionaire Zhang Jindong’s Suning conglomerate, people familiar with the matter have said. The deal would add to the 20% stake that Alibaba already owns in Suning.com Co., one of China’s biggest retailers of appliances, electronics and other consumer goods that’s valued at roughly $8 billion.

The potential investment could mark a comeback for Alibaba since authorities levied a $2.8 billion fine on the company in April for anti-monopoly violations, fueling its first loss in nine years. The deal would help the e-commerce firm encroach on top rival JD.com Inc.’s traditional stronghold of electronics, while joining hands with local authorities signals the tech billionaire and his company are ready to get back to deal-making.

“Should the deal proceed, it strengthens the case that Alibaba isn’t allowing regulatory overhang to constrain its strategic ambitions or opportunistic investments,” said Michael Norris, a tech analyst with Shanghai-based market research firm AgencyChina. “The potential strategic value of Suning’s stores, distribution centers and last-mile delivery stations to an increasingly omnichannel Alibaba is clear.”

Any deal will likely need to be approved by the State Administration for Market Regulation, the increasing powerful antitrust watchdog in Beijing. The regulator had previously penalized Alibaba for not properly declaring a past investment in Intime Retail Group Co., on top of the $2.8 billion fine levied as part of a wider anti-monopoly investigation.

Even as Alibaba attempts to moves on, Ma’s fintech arm Ant Group Co. is still undergoing a painful state-ordered transition into a financial holding company that will be regulated more like a bank. Beijing has also expressed concern over Alibaba’s media holdings and wants the company to offload those assets, including the South China Morning Post, Bloomberg News reported in March.

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A announcement could be made as soon as this week, according to the people, who asked not to be identified as the information is private. Negotiations are ongoing and a deal could still be delayed or fall apart, the people said.

Zhang, the Suning founder, will no longer have control of the company after the deal, the people said, marking the end of his run as a high-profile entrepreneur who drove his firm into an array of businesses, including ownership of the Inter Milan soccer team. That rapid expansion had fueled concerns over the group’s liquidity, which were exacerbated after the billionaire in September waived his right to a payment from China Evergrande Group, the world’s most indebted property developer.

Read more: Billionaire Who Helped Evergrande Hit by Bond, Stock Selloff

Suning.com is based in Nanjing, the capital city of Jiangsu province — a roughly 3-hour drive from Alibaba’s home base of Hangzhou, where it remains one of the most influential corporations even after the central government’s crackdown. The embattled firm has a strong physical retail presence in China, especially in its eastern part that includes financial center Shanghai.

Among hypermarkets, it has the fifth-largest nationwide share of 4.4%, according to 2020 data from Euromonitor International. Sun Art Retail Group Ltd., which Alibaba controls, has the biggest share at 13.7%. A consolidation of Alibaba’s units would pose a challenge to other players, like Walmart Inc.’s China operations — currently in fourth-place with a 9.3% market share — which has a tie-up with JD.com in its online operations.

Alibaba and Suning have long been closely allied, forming a partnership in areas ranging from logistics to online sales. In 2015, Alibaba invested $4.6 billion for its 20% stake in Suning.com, which in turn paid $2.3 billion to buy a 1.1% stake in the larger company that it later pared down. Since then, Suning.com’s shares have tumbled about 60% even as Alibaba’s stock more than doubled. The smaller firm’s bonds climbed Wednesday after news of the potential bailout.

The partnerships with Suning and other brick-and-mortar retailers are part of the e-commerce giant’s goal to build an empire where offline and online shopping are seamlessly integrated — a strategy that it calls New Retail. Alibaba Chief Executive Officer Daniel Zhang has made expansion into physical retail and the grocery business in particular a cornerstone of his growth strategy, an effort that paid off during the coronavirus pandemic.

Alongside investments in traditional retailers, the company has made a push into the offline world with physical stores for its Freshippo grocery and food startup. Its New Retail business has since grown into a $25.6 billion operation, contributing a fifth of total revenue in the year ended March.

A larger stake in Suning.com could help Alibaba fend off growing competition from JD.com, the Tencent Holdings Ltd.-backed online retail giant that is especially strong in electronics and home appliances. The segment accounted for just over half of JD.com’s revenues in the March quarter. Richard Liu’s corporation has also expanded into offline retail, outlining plans to build 300 home appliance flagship stores in second- and third-tier cities by 2025, along with 5,000 stores in smaller towns and villages.

“Alibaba already holds a 20% stake in Suning.com and both companies have been collaborating to develop new ways of shopping for consumer electronic goods by consumers in mainland China,” said Bloomberg Intelligence senior analyst Catherine Lim. “An increased stake in Suning.com could facilitate such collaborations and raise Alibaba’s share of online retail sales for consumer electronics, which currently trails rival JD.com.”

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