Alibaba to buy majority stake in Lazada

Alibaba's HQ in Hangzhou, China. The company is buying its way into a region on the cusp of an online shopping boom as fast- growing mobile and Internet usage propels consumer spending.
Alibaba's HQ in Hangzhou, China. The company is buying its way into a region on the cusp of an online shopping boom as fast- growing mobile and Internet usage propels consumer spending.PHOTO: BLOOMBERG

$1.35b deal gives Chinese online giant bigger regional footprint

BEIJING • Alibaba Group has agreed to buy a controlling stake in regional online retailer Lazada for about US$1 billion (S$1.35 billion), in its largest overseas investment so far, taking the Chinese e-commerce giant closer to its goal of expanding beyond its home turf.

Under the deal, the Hangzhou- based firm will buy about US$500 million of newly issued Lazada shares and the rest will be bought from various shareholders, including Germany's Rocket Internet, British supermarket chain Tesco and Investment AB Kinnevik.

Temasek Holdings had led a round of funding in Singapore- based Lazada in 2014.

The deal values Lazada at US$1.5 billion, Rocket said. It is selling a 9.1 per cent stake in Lazada and keeping an 8.8 per cent slice. Tesco said it would sell an 8.6 per cent stake for US$129 million. AB Kinnevik will also sell shares.

"With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation," Alibaba president Michael Evans said in a statement yesterday.

The Chinese company is buying its way into a region on the cusp of an online shopping boom as fast- growing mobile and Internet usage propels consumer spending.

Alibaba's billionaire chairman, Mr Jack Ma, has set a goal of getting at least half the company's revenue from overseas, with the Lazada deal adding sales of clothing and electronics in six South-east Asian markets, which include Indonesia, Malaysia, Thailand, Vietnam and the Philippines.

While Alibaba has come to dominate e-commerce in its home market, it remains dependent on China for the vast majority of its business.

The deal seems to represent a departure for Alibaba, which has mainly chosen to grow organically on its home turf, said Rakuten Ventures' managing partner, Mr Saemin Ahn.

Ms Marie Sun, an analyst at Morningstar Investment Service, said: "It has huge cash sitting on its balance sheet so it can do this kind of investment. It's also seeking future growth drivers. It needs to find some other place for growth."

Alibaba's overseas deals include a US$500 million investment with Hon Hai Precision Industry and SoftBank Group in India's online marketplace Snapdeal last year.

In India, Alibaba and its online finance affiliate Ant Financial Services invested in Paytm, the largest mobile payment and commerce platform in the country, and parent One97 Communications.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on April 13, 2016, with the headline 'Alibaba to buy majority stake in Lazada'. Print Edition | Subscribe