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Alibaba spending $1 billion to raise stake in Southeast Asia's Lazada
June 28, 2017 / 9:08 AM / 6 months ago

Alibaba spending $1 billion to raise stake in Southeast Asia's Lazada

SINGAPORE (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.

FILE PHOTO: Employees at online retailer Lazada fill orders at the company's warehouse in Jakarta, Indonesia April 15, 2016. REUTERS/Darren Whiteside/File Foto

Alibaba's announcement comes as its rivals such as 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. (tcrn.ch/2mSzlop)

The region may be the first market where Amazon and Alibaba will go head-to-head, if the U.S. firm confirms the plans.

“It is a clear signal from (Alibaba) that, now having learned the market better, that they really believe in the opportunity of ecommerce in southeast Asia,” Lazada Chief Executive Maximilian Bittner told Reuters in an interview.

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.

Besides financial support, Alibaba’s investment has provided Lazada with several benefits, including access to a wider range of merchants and improving its logistics capabilities.

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.

Bittner said having Alibaba as a backer was “very helpful” in distinguishing itself from Amazon and other competitors.

The Singapore Lazada website is seen in this illustration photo June 20, 2017. REUTERS/Thomas White/Illustration

“It will be easier to take on one 800 pound gorilla when you have the other 800 pound gorilla behind you,” he said, when asked about a potential Amazon entry.

On Wednesday, Alibaba said it will purchase the shares from certain Lazada shareholders at an implied valuation of $3.15 billion. Germany’s Rocket Internet and Sweden’s Kinnevik confirmed in separate statements that they were among the selling shareholders.

Last year’s deal had included partial stake sales by investors, including British supermarket operator Tesco Plc, Rocket and Kinnevik.

Bittner said Lazada management and Singapore state investor Temasek Holdings [TEM.UL] were the only other remaining shareholders, besides Alibaba.

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

“The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us,” Daniel Zhang, CEO of Alibaba, said in a statement. “We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”

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

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

Reporting by Aradhana Aravindan; Additional reporting by Anshuman Daga in SINGAPORE and Emma Thomasson in BERLIN; Editing by Muralikumar Anantharaman and David Evans

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