Alibaba takes joint venture route to Russia expansion

China’s largest e-commerce firm, Alibaba Group Holding 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 per cent 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 September 11.

The three Russian entities will have a combined 52 per cent 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 per cent stake in Mail.ru for a 24 per cent stake in AliExpress Russia.

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

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 capitalise on e-commerce 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.