Alibaba has joined Chinese local government and other corporate backers in a $1.4bn investment in Suning, the latest attempt to save the country’s biggest bricks-and-mortar retailer and owner of Inter Milan.

The deal leaves billionaire Zhang Jindong without a controlling stake in the formerly expansive group he founded in 1990, after he became tangled in a complex web of cross investments with other tycoons.

Suning “will be in a state of no controlling shareholder and no actual controller”, the company said.

Under the arrangement Zhang and interests linked to him and his family will transfer 17 per cent of the Shenzhen-listed group’s shares to a state fund in Jiangsu, the province where Suning is based.

Suning’s restructuring this week reflects Beijing’s new strategy of deploying private companies alongside state lenders to bail out debt-laden conglomerates in a bid to soften the risks from financial instability and job losses.

No detail was given on the value of the investment from the companies, which also include smartphone maker Xiaomi and Chinese appliance makers Haier and Midea, whose products are sold by Suning.

But Suning said that internet company Alibaba, which already owns 20 per cent of the group, will not increase its shareholding ratio as part of the deal.

Ahead of the announcement this week investors had speculated that Alibaba would take over Suning, which would have marked its first significant investment since founder Jack Ma fell foul of Chinese authorities. The billionaire’s criticism of China’s banking regulators last year sparked a crackdown on Ma and his business empire.

Alibaba declined to comment. Shares in Suning rose by their daily limit of 10 per cent in Shenzhen on Tuesday after the investment was announced, after sitting at an eight-year low since mid-June when trading was suspended.

Li Chengdong, head of the Haitun ecommerce think-tank, said Suning’s bailout was “meaningful” for the Chinese government as it would stabilise the company. But the deal still “made sense” from a business standpoint, buoying Alibaba’s position in appliance sales in the face of challenges from rival JD.com.

The cash injection is another twist in a years-long saga for Zhang, who grew Suning from a home appliance retailer more than 30 years ago to a conglomerate whose interests spread to areas including property.

Alibaba bought a 20 per cent stake in Suning in 2015 for $4.6bn, in what was billed as a strategic alliance with synergies across ecommerce and logistics. Two years ago Suning expanded further via the acquisition of French retailer Carrefour’s Chinese stores in an all-cash deal worth €620m.

Suning declined to comment on its debt liabilities. However, rating agency S&P put Suning’s debt at more than $6.6bn as of the third quarter last year. About two-thirds of that was short-term obligations.

Exacerbating its struggles, Suning’s core business took a hit last year as the Covid-19 pandemic dented sales at its physical stores while ecommerce margins were squeezed, analysts said.

Suning’s woes returned to the spotlight in February after it sought $200m in emergency cash for Inter Milan, the prestigious Italian football club, for which it paid €270m for a 70 per cent stake five years ago.

As part of moves to improve discipline in China’s markets and remove expectations the state will bail out financially distressed groups, Beijing is increasingly encouraging “burden-sharing” by creditors, analysts said.

Rather than look to sell a failing company’s assets, these highly co-ordinated state guided processes are focused on preserving jobs and business operations, said Ivan Chung, an analyst at Moody’s.

But it is difficult for investors to judge the merits of the transactions given the lack of transparency over their terms.

“We can never tell until maybe a few years down the road when you can see if they can really turn it around and make money. Or on the other hand, if the problem is bigger than they expected and they need to pump in more money, then you will know whether it is a good deal, or a bad deal,” Chung said.

Further clouding the outlook for Suning, the retailer has become embroiled in troubles at Evergrande, the heavily indebted real estate company whose credit rating has been downgraded by Fitch and Moody’s in recent weeks.

In 2017, Suning lent Rmb20bn ($3.1bn) to Evergrande’s mainland Chinese property subsidiary on the expectation of a windfall when it listed its shares. But the planned float was cancelled last year and the retailer, along with other big investors, declined to exercise a right to ask for their money back.

Additional reporting by Sherry Fei Ju and Sun Yu in Beijing