China's biggest home appliance retailer, Suning, and Hony Capital, an investment company linked to the IT group Lenovo, will buy a $420 million stake in the online TV services company PPTV.
PPTV is the largest online TV service in China ,with more than 340 million users, and offers sports, entertainment, news and other video content.
Suning will invest $250 million to buy a 44 percent stake in PPTV, becoming its largest shareholder, while Hony Capital will make up the remaining $170 million. The deal values PPTV at $568 million.
Movements in China's online video space are closely watched in Hollywood as it offers opportunities to provide content. With 591 million users, China has the biggest online market in the world, and the online video market is estimated to be worth $2.7 billion next year.
"It is a key step for Suning to become a fully Internetized company and is an important step in speeding up its transformation process," Suning vice chairman Sun Wei-min said in remarks carried on the microblog service Weibo.
Suning is keen to build its online activities. Its e-commerce business doubled to 10.6 billion yuan in the first six months of the year. It also announced earlier this year that it was applying for permission to launch a private bank.
Trading in Suning shares had been suspended all day on Monday pending the announcement and will resume on Tuesday.
PPTV had previously been strongly linked to the e-commerce giant, Alibaba.
China's Internet video market is crowded and deeply competitive, but recent months have seen marked signs of consolidation.
In April, the video unit of Baidu, often called the "Chinese Google," bought the Shanghai-based streaming video firm PPS Net TV, a PPTV rival, for between $350 million and $400 million, which made it more serious competition for the online video market leader Youku Toudu.
In March of last year, online video giant Youku acquired rival Toudu in an all-stock deal worth more than $1 billion.
Hony Capital is linked to Legend Holdings, the parent of the Hong Kong-listed Lenovo Group, the world's biggest PC manufacturer. Hony has invested in other media and online TV businesses including TV advertising production firm Beijing Galloping Horse Film & TV Production, media company Happigo Home Shopping, and iQIYI.com Inc, in which Baidu has a controlling stake.
Separately, the Chinese online media group Sohu reported that total revenues in the third quarter to the end of September were $368 million, up 29 percent year-on-year and 9 percent on the previous quarter.
During that period, brand advertising revenues were $125 million, up 60 percent on the year, and 25 percent quarter-on-quarter.