Alibaba Group Holding Ltd. (NYSE: BABA) agrees to pay $1 billion to buy a controlling stake in Southeast Asian online retailer Lazada, marking its biggest overseas acquisition.
Under the deal, Alibaba will pay $500 million for the newly issued Lazada shares and pay additional $500 million to buy out shares owned by existing shareholders, the company said on Tuesday. The existing shareholders include Berlin-based tech incubator Rocket Internet AG, British supermarket operator Tesco PLC and Swedish investment firm Investment AB Kinnevik.
Singapore e-commerce startup Lazada, founded in 2012 by Rocket, operates in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Lazada had expanded aggressively in Southeast Asia in the recent years thanks to increase of Internet penetration and smartphone sales.
Alibaba has invested heavily to expand into e-commerce, logistics, media as well as entertainment in the recent years. Now it is not satisfied with domestic expansion, it wants to expand its business oversea to gain more growth. The Chinese e-commerce giant has already dominated e-commerce in its home market and more than 86 percent of its revenue from China. With the deal of Lazada, Alibaba are able to remain its high growth while growth slows at home.
“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 Tuesday’s statement.
“Overseas expansion requires a lot of investment in logistics, it would take Alibaba much longer to build the business from the ground up,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong. “What Alibaba could do is integrate the businesses and introduce more existing merchants to Lazada to export their products overseas.”