Behind the $1b Alibaba-Lazada deal

Yesterday’s Alibaba-Lazada deal was great news for everyone in the Southeast Asia startup ecosystem. In the last 24 hours, we’ve managed to learn some of the stories behind the deal.

US$500 million worth of secondary stocks were sold at a valuation of US$1.5 billion. And on top with Alibaba’s US$500M investment, that puts Lazada’s valuation at a $2 billion post-money. Rocket Internet has confirmed to Tech in Asia that this is true. For reference, in December 2014, Lazada’s post money valuation stood at $1.25 billion.

Alibaba has the option to buy the remaining stakes in Lazada within 12 to 18 months.

We also learned that Temasek, the common investor between Lazada and Alibaba, was the catalyst of the deal. We’ve reached out to Temasek and they declined to comment.

Our source added: “Alibaba and Lazada signed the term sheet in the first week in January 2016 and due diligence was finished last week.”

The deal also has a clause stating that Alibaba has the option to buy the remaining stakes in Lazada within 12 – 18 months, details which Rocket Internet has confirmed. It isn’t clear to us what will trigger Alibaba to buy out Lazada in full, but it is likely hinged on Lazada’s performance.

Read: 6 reasons why Alibaba invested in Lazada

The deal, as we heard, was a relief to many Lazada employees:

“People were afraid that with liquidation preference that the common shares will become worthless. The share price was just above the threshold, so no liquidation preferences were triggered and all common shareholders got some liquidity. Since everyone was afraid and expected they might get squeezed, I think people are more relieved.”

“Overall it’s a great deal for Southeast Asia. Alibaba investing in SEA will trigger a lot of interest for the region,” the source added.

We have reached out to Alibaba, Rocket Internet, and Temasek for comments and will update when we hear back.

Update on February 10, 2017: We edited the story to reflect statements from Lazada.