Tuesday, April 12, 2016

Alibaba buys Controlling Stake in Southeast Asian Online Retail Giant Lazada for $1 billion

Alibaba, Lazada, Jack Ma

China based e-commerce titan Alibaba Group Holding Ltd said on Tuesday that they have agreed to buy a controlling stake in Southeast Asian online retailer Lazada to tap into the region's lucrative consumer market for about $1 billion. This will expand Alibaba's reach to the Southeast Asian market.

Under the deal worth approximately $1 billion which is Alibaba's biggest overseas investment so far, they will buy around $500 million worth of newly issued shares in Lazada, as well as acquire shares from some existing shareholders. These include Britain's biggest supermarket operator Tesco Plc, which said it would sell an 8.6 percent stake for $129 million, valuing Lazada at $1.5 billion. Rocket and Investment AB Kinnevik will also sell shares.

Alibaba President Michael Evans said the investment will support Alibaba's expansion plans in Southeast Asia.

Lazada Group was founded by Germany's Rocket Internet in 2012, their headquarters is in Singapore and they also operates in Malaysia, Indonesia, the Philippines, Thailand and Vietnam.

Alibaba and Lazada did not specify the size of the stake purchased but the sales imply a two-thirds holding.

The e-commerce market for business-to-consumer sales across all of Indonesia, the Philippines, Singapore, Malaysia, Vietnam and Thailand was just $10.5 billion in 2015, or 1.5 percent of retail volume, according to consultancy firm Frost & Sullivan. Just to compare, it accounts for 12% of retail in China, and 8% in the United States.

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