Alibaba moves into south-east Asia with $1bn Lazada deal

12 Apr 2016

Chinese e-commerce powerhouse Alibaba is expanding its reach into the heart of south-east Asia with the announcement that it has purchased the Malaysian e-commerce company Lazada in a $1bn deal.

While Alibaba is well known to those familiar with the powerbrokers of the e-commerce market, its wealth and influence is largely the result of the sheer size and success it has within the confines of China.

Alibaba’s reliance on the Chinese market can be seen with the statistic that showed, of its total revenues in December, 86pc originated within China.

Now, in a deal that will help founder Jack Ma achieve his aim of half the company’s revenues coming from overseas, it has purchased its Malaysian competitor Lazada, in a deal worth approximately $1bn, to expand its reach into south-east Asia.

Lazada has established itself as one of the largest e-commerce platforms in south-east Asia, with it primarily active in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam since it was first founded in 2012.

Largest-ever investment outside of China

According to Bloomberg, Alibaba will be paying out a sum of $500m to purchase the shares of the company, and will pay around the same amount to Lazada’s investors, which includes the likes of Tesco and the German online investor Rocket Internet.

If the deal is indeed to go ahead, this will make the purchase the single largest in Alibaba’s history outside of its own country, but it still remains far behind the cost of its purchase of the ‘Chinese YouTube’ site, Youku Tudou, which was valued at close to $5bn.

This agreement between Alibaba and Lazada now values the latter at $1.5bn and it is envisioned by those who have analysed the deal as a smart move for Alibaba, which will now have a vehicle with which to enter the hotly-contested market, rather than having to build a service from the ground up.

In a statement on the purchase, Alibaba’s president Michael Evans said: “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.”

Kuala Lumpur image via Shutterstock

Colm Gorey was a senior journalist with Silicon Republic