The online retailer has bought a controlling stake in Lazada Group to dominate the Asian E-commerce industry
The E-commerce market of China is most established on the earth- it’s bigger than Western markets Europe and US. With not a lot of space for rising market shares, the game in the country has for a long period of time been over. And who is aware of that better than the online trading company of China, Alibaba?
That is why the organization owned by tycoon Jack Ma announced it is entering the next lucrative ecommerce market: Southeast Asia. On 12th April 2016, the Chinese online retailer announced that it has taken the decision to purchase a controlling stake worth $1billion in Lazada of Rocket Internet, the fastest expanding online departmental chain that is viewed as the rival of the Hangazhou based organization in the Southeast Asian region.
Lazada sells an extensive range of goods- from consumer electronics to clothing- in Vietnam, Thailand, Phillipines and Indonesia. Alibaba has stated shares from current shareholders and half a billion dollar worth newly issued equity sum up to make the $1 billion investment.
Lazada Group CEO Max Bittner stated “Southeast Asia is an attractive mobile-driven consumer market that is highly fragmented and diverse with significant barriers to entry and a nascent modern retail sector that has large headroom for growth,”
The agreement includes a provision for the web retailer to purchase most of the residual stake in Lazada. The press release issued by Rocket Internet tells us that the German internet company yet has a stake of 8.8% in the Singapore based organization after the completion of the agreement.
Its profit has increased by 15% on its investment of $20.5 million in the Singaporean E-commerce organization. Lazada has raised $700 million in revealed financing in the past years, primarily from Summit Partners, Tengelmann Ventures, Temasek, Verlinvest and Kinnevik Investment.
As per reports by CNBC, Rocket Internet will spin off a 9.1% share in the companies for generating cash worth $137 million but will continue to own 8.8% of the stake.
British supermarket chain Tesco, which earlier held 19.6% of the equity of the company, will spin off 8.6% equity share in the German startup for $129 million. After further investment by Abruzzo, the conventional retailer will continue to own 8.3% stake.
Tesco stated it will use the funds generated from the transaction to arrange general working capital. As per reports by Reuters, the Hertfordshire based organization has been focused to revive its major grocery business in UK in the previous 2 years and begun spinning off its non-core divisions including its South Korea based business in 2015.
Alibaba has continuously been expanding its global presence in the electronic trading industry. In 2015, it injected over $100 million into Japan based online luxurious goods seller, led a half billion dollar fundraising round into the Indian online marketplace operator Snapdeal and increased its share in the Singaporean national postal service provider Singpost to 14.5%.
The agreement values the Singaporean web retailer at $1.5 billion. It would turn Alibaba into its controlling shareholder.