Alibaba Group Holding (BABA) Buys Controlling Stake in Lazada

Alibaba Group Holding (NYSE:BABA) agreed to acquire a controlling stake in Lazada, a leading e-commerce platform in Southeast Asia founded in 2012 by Germany’s Rocket Internet.

According to the Chinese e-commerce giant, the transaction was worth approximately $1 billion including a $500 million investment in the newly issued equity capital of Lazada and acquisition of shares from some of its shareholders.

Alibaba gains access to a platform with growing consumer base

Lazada is based in Singapore with operations in Indonesia, Malaysia, the Philippines, Thailand and Vietnam. The combined population of the six countries is around 560 million and estimated internet user base is 200 million, according to Internet Live Stats.

Only 3% of the total retail sales in Southeast Asia are conducted online. Alibaba believes that the region offers tremendous growth opportunities.

In a statement, Alibaba President Michael Evans, said, “Globalization is a critical strategy for the growth of Alibaba Group today and well into the future. 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 eCommerce globally.”

Evans added that Alibaba’s investment in Lazada was consistent with its strategy if connecting brands, distributors, and consumers. It also supports the company’s ecosystem expansion in Southeast Asia.

Transaction offers significant synergies

On the other hand, Lazada CEO Max Bittner said the transaction offers significant synergies that will drive great benefits customers in the region. It will also help accelerate Lazada’s goal to provide consumers access to the broadest and most unique assortment of products.

“Leveraging Alibaba’s unique know-how and technology will allow us to rapidly improve our services and provide an even more effortless shopping and selling experience,” said Bittner.

Alibaba did not disclose the size of its stake in Lazada. The Chinese e-commerce giant entered a put-call arrangement with certain Lazada shareholders, and it has the option to buy their remaining stakes in the Southeast Asian e-commerce platform at fair market value, 12 to 18 months after the closing of the transaction.