Alibaba takes joint venture route to Russia expansion

[September 11, 2018]   By Polina Nikolskaya and Vladimir Soldatkin

VLADIVOSTOK, Russia (Reuters) - China's largest e-commerce firm, Alibaba Group Holding Ltd has joined forces with a state fund and two technology firms in Russia, hoping that access to their client base of more than 100 million people will boost its development.

Alibaba will own 48 percent of AliExpress Russia as a result of a deal signed with Russian Direct Investment Fund, mobile operator Megafon and internet group Mail.ru during Russia's Eastern Economic Forum on Tuesday.

The three Russian entities will have a combined 52 percent stake in the e-commerce platform after contributing cash, shares and other assets.

"By partnering with Russia's leading consumer internet platform, AliExpress Russia will leverage Mail.ru Group's 100 million internet users across its social media, messaging, e-mail and online games properties," the companies said.

E-commerce has grown rapidly in Russia in recent years, spurred by improved internet access, with turnover exceeding $14 billion last year, one third of which were cross-border deals, according to Russia's Association of Internet Trade Companies.

Alibaba will fold its AliExpress Russia business into the new JV, while Megafon will swap its 10 percent stake in Mail.ru for a 24 percent stake in AliExpress Russia.

Mail.ru will contribute its Pandao e-commerce business and cash in exchange for a 15 percent stake in AliExpress Russia, and RDIF will acquire a 13 percent stake in AliExpress Russia.

The logo of Alibaba Group is seen inside DingTalk office, an offshoot of Alibaba Group Holding Ltd, in Hangzhou, Zhejiang province, China July 20, 2018. PicREUTERS/Aly Song

Shares in Mail.ru jumped on news of the transaction which is expected to close in the first quarter of 2019.

"Today's deal gives Mail a stake in what we believe is the best-positioned platform to capitalize on ecommerce in Russia," analysts at Renaissance Capital said in a note.

The parties will invest hundreds of millions of dollars into the venture, Mail.ru Group Russia CEO Boris Dobrodeev said. The JV also plans to invest into another business together with Mail.ru Group, including foodtech, the companies said.

Mail.ru Group's London-listed stock was up 9.73 percent by 1044 GMT. ($1 = 70.2125 roubles)

(Writing by Maria Kiselyova; Editing by Jason Neely/Keith Weir)

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