Xiaomi is set to buy around 3 percent of software firm Kingsoft from investment holding giant Tencent, according to a Kingsoft filing made to the Hong Kong stock exchange on Monday.
Xiaomi will buy 35.3 million shares or 2.98 percent of Kingsoft from TCH Saffron Ltd., a Tencent subsidiary, for HK$527 million ($68 million) at HK$14.93 ($1.93) per share, the company stated in its filing. The purchase comes at a 5.7-percent discount to Xiaomi, as Kingsoft's Friday closing price was HK$15.84 a share, according to the Wall Street Journal.
The deal with Xiaomi, China's largest smartphone maker and third-largest in the world, is expected to close on Jan. 30. Tencent will retain a 9.6-percent stake in Kingsoft.
"The acquisition fully reflects Xiaomi's strong confidence in the business and potential development of the group," Kingsoft said in its filing.
"Partnering with Xiaomi, both as a business partner and strategic investor of the company, would greatly benefit the company and help promote the company's businesses."
Valued at over $2 billion, Kingsoft produces entertainment, Internet security and enterprise software. It has strong links to Xiaomi's co-founder and CEO Lei Jun, who is also Kingsoft's founding chairman and holds 15 percent of the company. With the deal, Lei's voting rights in Kingsoft will also rise to 29.9 percent.
The investment comes as Xiaomi sets to expand its reach after becoming one of the world's most sought-after startups with $1.1 billion in new funding in 2014.
In November, the company invested $300 million in iQiyi.com, a Web streaming platform backed by Chinese Web service provider Baidu, and acquired a 1.29-percent stake worth $200 million in appliance maker Midea in December. It also recently entered a Series C funding round for Misfit, a startup specializing in wearable devices and health and fitness platforms.
"We are looking to invest in more this year, maybe a lot more over the next year," Xiaomi's president Bin Lin said in an interview on Tuesday. "This is a strategy that will continue."