US-based Wal-Mart Stores will divest its Chinese online grocery unit to JD.com, the second-largest online retailer in China after Alibaba.

This transaction will see Wal-Mart receiving a 5% stake in JD.com, worth $1.5bn, as well as securing access to JD.com’s delivery network and 150 million users.

It is expected to boost the US firm’s reach in tapping the growing middle-class consumer segment in the world’s second largest economy.

"It is expected to boost the US firm’s reach in tapping the growing middle-class consumer segment in the world’s second largest economy."

In China, Wal-Mart operates more than 400 offline stores.

Wal-Mart paid $760m for acquiring a 49% stake it did not own in Yihaodian online grocery platform last July. Since this acquisition, the supermarket chain has been struggling with tepid sales and closing underperforming stores.

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The latest deal with JD.com will intensify competition in the online grocery business, which is expected to reach almost $180bn by 2020 from the current $40bn.

According to the transaction terms, JD.com will issue around 145 million new class-A shares to Wal-Mart.

Although JD.com will acquire ownership of the online grocery platform, it will be operated by Wal-Mart.

Morgan Stanley & Co LLC served as financial adviser and Morrison & Foerster as legal adviser to Wal-Mart.

Orrick Herrington Sutcliffe and Han Kun Law Offices served as legal advisers to JD.com.