Alibaba spending $ 1 b to raise stake in Southeast Asia’s Lazada

Thursday, 29 June 2017 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Chinese e-commerce company Alibaba Group Holding is investing an additional $ 1 billion in Southeast Asian online retailer Lazada Group, boosting its stake by nearly a third to 83 percent and amplifying its focus on the region.

The announcement by Alibaba on Wednesday of the investment comes as its rivals like Chinese e-commerce firm JD.com Inc are expanding operations in Southeast Asia and amid media reports that Amazon is eyeing an entry into the region of 600 million people where only a fraction of total retail sales are currently conducted online.

The move doubles Alibaba’s investment in Lazada after last year’s deal to buy a controlling stake in it for about $ 1 billion and is a part of its efforts to boost its global sales. Alibaba had the option to buy the remaining stakes from some Lazada investors, 12-18 months after the deal closed. “The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us,” said Daniel Zhang, CEO of Alibaba. “We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”

On Wednesday, Alibaba said it will purchase the shares from certain Lazada shareholders at an implied valuation of $ 3.15 billion.

It did not name the shareholders, but Germany’s Rocket Internet and Sweden’s Kinnevik in separate statements confirmed they were disposing their remaining Lazada stakes. Last year’s deal had included partial stake sales by investors, including UK supermarket operator Tesco Plc, Rocket and Kinnevik.

Lazada, founded in 2012, is headquartered in Singapore and also operates in Malaysia, Indonesia, the Philippines, Thailand and Vietnam. In the 12 months ended 31 March 2017, Lazada had about 23 million annual active buyers, according to Alibaba’s annual report.

Lazada has been expanding its offerings over the last year, buying Singapore-based online grocer RedMart and tying up with companies such as Netflix and Uber [UBER.UL] for a membership program.

Alibaba shares were down 0.4 percent in pre-market trading, while Rocket shares were 2.3% lower.

Amazon did not immediately respond to an emailed request for comment on its plans for the region.