Alibaba Taps Russian Market With USD 2 Billion Joint Venture

Alibaba Group Holding Ltd. is planning to set up a $2 billion joint venture with the richling Alisher Usmanov’s internet services firm Mail.ru Group Ltd for strengthening the Chinese Company’s foothold in Russian e-commerce.

The most valuable company of Asia has also signed a mutual understanding on Tuesday with the Mail.ru for merging their online market places in the nation of more than 140 million citizens. The agreement is backed by the Kremlin through the Russian Direct Investment Fund and the local investors those are collectively controlling the new business. Mail.ru’s worldwide depository receipts traded in London have jumped approximately 12 per cent.

The combined company would be better able to complete  with the local adversary Wildberries and the Yandex. The Russian Unit AliExpress of Alibaba is most probably selling the imported goods from China and don’t have to worry about the competitions from the Amazon.com inc because the US giant has meager occupancy in the country.

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“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 . “But the future, which will require the presence of our partners at this table, will involve building a much bigger local business.”

Alibaba is also planning to fold its operations those include AliExpress and Tmall into the venture, whereas the Usmanov’s MegaFon PJSC will sell its 10 percent stake in Mail.ru — those worth nearly $486 million at Monday’s close — to Alibaba in return for 24 per cent of the business. That approximate  value of the deal includes $2 billion.

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 percent stake, while Mail.ru will hold the remaining 15 percent.

“Mail.ru has been able to use its strategic and financial fire-power 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.

The GDRs of Mail.ru were nearly 9.3 percent at 12:34 pm in London. the parties have employed the deal at  Vladivostok economic forum which was attended by the president Vladimir Putin and Alibaba Chairman Jack Ma. The Chinese company had been also  negotiating a similar deal with the Sberbank PJSC, Russia’s largest bank, but abandoned the talks after the lender partnered with Yandex NV instead. Alibaba recently coiled out Tmall for Russia after winning the consumers through AliExpress.

Ma, had started Alibaba.com in the year 1999 as the business-to-business marketplace with its 17 co-founders, they also announced their plans of stepping back from the Chinese e-commerce firm.

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