Alibaba spending $1b to boost Lazada stake to 83%

Photo credit: Alibaba.

Jack Ma’s Alibaba is hiking its stake in prominent Southeast Asian online retailer Lazada to 83 percent for roughly US$1 billion, Lazada Group CEO Maximillian Bittner tells Tech in Asia.

The fresh infusion comes a little more than a year after the Chinese ecommerce behemoth snapped up a controlling 51 percent stake in Lazada for the same amount, bringing its total investment so far to over US$2 billion.

The takeover strengthens Alibaba’s foothold in Southeast Asia, a fragmented market of over 600 million people where online retail spend could be worth US$88 billion in a decade – growing at an annual rate of 32 percent, according to a report by Google and Lazada shareholder, Singaporean sovereign wealth fund Temasek.

Founded by German startup factory Rocket Internet, Lazada operates in six countries in the region: its headquarter Singapore, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

Alibaba is buying the additional shares at an implied valuation of US$3.15 billion, Bittner noted, more than double its pre-money valuation of US$1.5 billion at the time of the first stake purchase. Lazada will continue to operate under the same brand following the investment.

Bittner said Alibaba exercised its option to buy out all Lazada shareholders, except for Temasek and Lazada’s management, which, together, hold the remaining 17 percent of the company. Lazada investors who sold stakes include Rocket, UK-based supermarket operator Tesco, and Swedish investor Kinnevik.

Conquering new territories

Lazada gives Alibaba a door into a nascent but populous market amid slowing growth and increasing competition, largely from JD, in China.

Ma previously gave a tall order of generating at least 50 percent of the group’s revenue from overseas. Lazada’s acquisition was a big step in that direction.

“The ecommerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us,” Alibaba Group CEO Daniel Zhang said in today’s press statement on the additional purchase. “We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”

During the past year, both parties have worked on a number of ecommerce initiatives in Southeast Asia, with the aim of lowering barriers and facilitating borderless commerce. These initiatives include the establishment of a fulfillment center in Malaysia and launching of Taobao Collection in Singapore and Malaysia to allow local customers to shop for products from China. The duo is also integrating their logistics operations as well as payment systems Alipay and HelloPay.

See: With the Lazada-Alibaba marriage, is it game over for rivals?

All those things are supposed to give Lazada enough clout for a looming mega battle with Amazon, whose entry in Southeast Asia is highly anticipated.

Bittner himself said last month the US giant could be entering Singapore initially by launching its Prime membership program.