AAA Corporates score big returns as Alibaba invests $1bn in Lazada

Corporates score big returns as Alibaba invests $1bn in Lazada

E-commerce group Alibaba invested $1bn in Singapore-based e-commerce marketplace Lazada today in a deal that gave partial exits to investors including e-commerce holding company Rocket Internet and retailer Tesco.

Alibaba acquired a 67% stake in Lazada through the investment, securing $500m of newly issued shares and $500m of shares held by existing investors including Rocket Internet, Tesco and investment firm Kinnevik.

Founded in 2012 and incubated by Germany-based Rocket Internet, Lazada operates a diversified e-commerce platform that covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. It receives some five million visits each day.

Lazada had raised at least $685m in funding altogether, not including a reported but unconfirmed nine-figure investment by JP Morgan in 2012. Its last funding was a $248m series F round in December 2014 led by Singaporean state-owned fund Temasek that included Rocket Internet, Kinnevik and investment firm Verlinvest.

Rocket Internet sold a 9.1% stake in Lazada to Alibaba, netting it $137m. It retains an 8.8% share of the company, having so far made a 15 times return on the initial €15m ($17m) it invested.

Tesco first became an shareholder of Lazada when it led a $250m series E round for the company in 2013, investing alongside Kinnevik, conglomerate Access Industries and Verlinvest. It sold a £90m ($129m) stake to Alibaba and will keep an 8.3% share.

Kinnevik sold a 3.8% stake in the company for $57m, leaving it with 3.6%. Kinnevik and Rocket Internet are among the Lazada shareholders to have agreed the right to collectively sell their remaining stakes to Alibaba for a fair market price in the 12 to 18 months after the deal closes.

Other investors in the company include Tengelmann Ventures, which acts as the corporate venturing arm of retail group Tengelmann, Holtzbrinck Ventures and Summit Partners. They have not disclosed whether they have sold shares, though the size of Alibaba’s investment and the other stake sales makes it likely.

Tengelmann Ventures invested a reported $20m in Lazada in January 2013 before taking part in a $100m round in June the same year that also featured Holtzbrinck Ventures, Kinnevik, Summit Partners and Verlinvest.

China-based Alibaba’s interest in Lazada represents a considerable leap in the Southeast Asian market. The six countries Lazada serves have a combined population of 560 million, yet only 3% of transactions in the region are conducted online, meaning there is significant room for growth.

Michael Evans, Alibaba’s president, 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 for future growth in one of the most promising regions for e-commerce globally.

“This investment is consistent with our strategy of connecting brands, distributors and consumers wherever they are and support our ecosystem expansion in Southeast Asia to better serve our customers.”

Credit Suisse (Hong Kong) served as financial adviser to Alibaba for the deal, wile Goldman Sachs advised Lazada.

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