Alibaba to create a one-stop platform for Russian consumers

AliExpress, Mail.ru Group, MegaFon and RDIF join forces

Alibaba to create a one-stop platform for Russian consumers. Source: shutterstock.com

A joint venture in Russia for Alibaba Group, which will bring together popular e-commerce, social media, and gaming platforms has won approval from Russian regulators.

Russia’s Federal Antimonopoly Service has cleared the joint venture, which was first announced last September, to move forward. Now, Russia’s most popular shopping site, Alibaba-owned AliExpress, along leading internet company Mail.ru Group, Russian mobile-telecommunications operator MegaFon and sovereign-wealth fund Russian Direct Investment Fund (RDIF) can join forces to create what they call a one-stop destination for merchants, consumers and internet users across Russia and the CIS to communicate, socialize, shop and play games, all within the same online ecosystem.

In addition to the regulatory approval, the companies signed “definitive documents” that bring the JV closer to launch. First, they agreed that the joint venture would be majority owned by Russian shareholders, overseen by a board of directors with representation from RDIF, Alibaba, MegaFon and Mail.ru Group, and managed by two co-CEOs. One CEO will be nominated by Alibaba and the other by Mail.ru Group, according to the terms of the JV. Alibaba nominated current AliExpress Russia head Liu Wei, while Mail.ru Group nominated Dmitry Sergeev, current first deputy chief executive officer of Mail.ru Group. They are expected to take on their new roles once all transactions for the JV have been completed.

In addition to blending social media and e-commerce, the joint venture will work to support Russia’s consumption upgrade by delivering a greater selection of high-quality products to the market. For Russian small and medium-sized enterprises, it’s a chance to tap a newly connected ecosystem in the domestic market while accessing over 600 million consumers using Alibaba’s platforms, including in China, Southeast Asia, Turkey, Europe and India.

Alibaba will invest $100 million and contribute AliExpress Russia into the JV. This consists of Alibaba Group’s current Russia-based domestic and cross-border operations of the global retail marketplace business of AliExpress. MegaFon will sell its 9.97% economic stake in Mail.ru Group to Alibaba Group in exchange for a 24.3% stake in the JV, with 30.2% voting rights. Mail.ru Group will contribute its Pandao e-commerce business and cash investments of $182 million in exchange for a 15% stake in the JV, with 18.7% voting rights. RDIF will invest $100 million into the JV and may further acquire additional shares of the JV from Alibaba for $194 million. Upon the exercise of the option to purchase the additional shares in the JV, RDIF will own economic and voting stakes in the joint venture of 12.9% and 9.6%, respectively.

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