In its largest overseas acquisition to date, Alibaba has acquired a controlling stake in Southeast Asian e-commerce pioneer Lazada for about US$1 billion.
Chinese e-commerce giant Alibaba has acquired a controlling stake in Southeast Asian e-commerce pioneer Lazada. The move is aimed at helping Alibaba tap into Southeast Asia’s growing consumer retail markets.
The deal is worth around US$1 billion, with Alibaba buying approximately US$500 million worth of newly issued shares, as well as acquiring shares from existing shareholders, including Rocket Internet, Tesco and Swedish investment firm Investment AB Kinnevik. The deal is Alibaba’s largest overseas acquisition to date.
The acquisition comes as growth in China continues to slow and Chinese companies including Alibaba look into new areas to pursue growth opportunities.
Lazada currently operates e-commerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. While this region has a combined population of around 560 million people, only about 200 million of those people are online. Currently, less than 3 percent of the region’s total retail sales are conducted online, compared with around 8 percent in China. With internet penetration continuing to rise, the region offers massive growth potential.
“Globalisation is a critical strategy for the growth of Alibaba Group today and well into the future,” said Michael Evans, President of Alibaba. “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 for future growth in one of the most promising regions for e-commerce globally.
“This investment is consistent with our strategy of connecting brands, distributors and consumers wherever they are and supports our ecosystem expansion in Southeast Asia to better serve our customers.”
Max Bittner, CEO of Lazada Group added, “We are very excited about joining forces with Alibaba and see significant synergies that will drive great benefits to our customers in Southeast Asia.
“The transaction will help us to accelerate our goal to provide the 560 million consumers in the region access to the broadest and most unique assortment of products. Furthermore, leveraging Alibaba’s unique knowhow and technology will allow us to rapidly improve our services and provide an even more effortless shopping and selling experience.”
Moving into emerging markets like Southeast Asia presents some challenges. The region’s under-developed infrastructure, slow internet speeds and weak internet penetration present significant hurdles for Alibaba in the region.
However, Satish Meena, an analyst at Forrester, told the Wall Street Journal the deal gives Alibaba access to a market where competitive dynamics are more favourable to Alibaba than in Western markets.
“Overseas expansion can be very expensive when you include the cost of building the brand and investment in logistics,” he said. “[This deal] will allow Alibaba to focus on bringing [in] more merchants, while using the existing brand name of Lazada to grow further.”