S.M. Entertainment said Thursday it has formed a strategic partnership with Alibaba Group.

Under the deal, the Chinese e-commerce giant will buy 870,000 of S.M.'s newly issued stocks for 35.5 billion won, the South Korean management agency said in a regulatory filing. That means Alibaba will own 4 percent of S.M.'s shares.

The agency said it will engage in online music distribution, marketing and merchandising in China through Alibaba Music Group.

"Through this partnership, we'll synergize in various fields, including China's digital music industry," S.M. said in a statement. "We'll continue to localize and expand our business in China."

Alibaba Music Group was founded in July as part of the Chinese group's attempt to enter the online music industry. (Yonhap)