Alibaba spending US$1b to raise stake in South-east Asia's Lazada

[SINGAPORE] Chinese e-commerce company Alibaba Group Holding is investing an additional US$1 billion in South-east Asian online retailer Lazada Group, boosting its stake by nearly a third to 83 per cent and amplifying its focus on the region.

Alibaba's announcement comes as its rivals such as Chinese e-commerce firm JD.com Inc are expanding operations in South-east 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 region may be the first market where Amazon and Alibaba will go head-to-head, if the US firm confirms the plans. "It is a clear signal from (Alibaba) that, now having learnt the market better, that they really believe in the opportunity of ecommerce in South-east 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 US$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 for a membership programme.

Mr Bittner said having Alibaba as a backer was "very helpful" in distinguishing itself from Amazon and other competitors. "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 US$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.

Mr Bittner said Lazada management and Singapore state investor Temasek Holdings 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 South-east Asia through Lazada to capture these growth opportunities."

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

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

REUTERS