TECHNOLOGY: Alibaba is planning what could be the biggest US public debut ever. Picture: REUTERS
TECHNOLOGY: Alibaba is planning what could be the biggest US public debut ever. Picture: REUTERS

Moscow — Alibaba Group is setting up a $2bn joint venture with billionaire Alisher Usmanov’s internet services firm Mail.ru Group to strengthen the Chinese company’s foothold in Russian e-commerce.

Asia’s most valuable company signed an accord on Tuesday with Mail.ru to merge their online marketplaces in the nation of more than 140-million people. The deal is backed by the Kremlin through the Russian Direct Investment Fund and the local investors will collectively control the new business. Mail.ru’s global depository receipts traded in London jumped as much as 12%.

The combined company will be better able to compete with local rivals Wildberries and Yandex. Alibaba’s Russian unit AliExpress mostly sells goods imported from China and hasn’t had to worry about competition from Amazon because the US behemoth has little presence in the country.

"A big part of what we’ve been able to develop so far in Russia has been our cross-border business," Alibaba president Mike Evans told reporters. "But the future, which will require the presence of our partners at this table, will involve building a much bigger local business."

Alibaba will fold its Russian operations including AliExpress and Tmall into the venture, while Usmanov’s MegaFon will sell its 10% stake in Mail.ru — worth roughly $486m at Monday’s close — to Alibaba in return for 24% of the business. The deal values the new outfit at about $2m.

Mail.ru will bring its mobile marketplace for Chinese goods, Pandao, into the new company, which will also get direct access to users of two popular Russian social networks owned by Mail.ru. The Russian Direct Investment Fund will add an unspecified amount of funding in return for a 13% stake, while Mail.ru will hold the remaining 15%.

"Mail.ru has been able to use its strategic and financial firepower to disrupt the market over a fairly short period and end up with a stake in Russia’s leading e-commerce platform," David Ferguson, analyst at Renaissance Capital said in a note.

Mail.ru’s global depository receipts were up 9.3% at 12.34pm in London.

The parties inked the deal at a Vladivostok economic forum attended by President Vladimir Putin and Alibaba chairman Jack Ma. The Chinese company had been negotiating a similar deal with Sberbank, Russia’s largest bank, but abandoned talks after the lender partnered with Yandex instead. Alibaba recently rolled out Tmall for Russia after winning consumers through AliExpress.

Ma, who started Alibaba.com in 1999 as a business-to-business marketplace with 17 co-founders, recently announced plans to step back from the Chinese e-commerce titan. His company, which is pushing into overseas markets from Southeast Asia to Russia, last year saw daily package deliveries reach 55-million.

With Edwin Chan

Bloomberg

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