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AliExpress Russia JV Deal Closes

Editor’s note, 10.9.19: This story was updated to note the closing of the transaction that formed the new AliExpress Russia joint venture.

Editor’s note, 6.11.19: This story was updated to include the two newly named co-CEOs for the AliExpress Russia JV.

Editor’s note, 6.5.19: This story was updated to reflect new developments in the planned joint venture in Russia between Alibaba Group, Mail.ru Group, MegaFon and the Russian Direct Investment Fund.The original story ran Sept. 11, 2018.

The transaction to form a joint venture in Russia for Alibaba Group – which will bring together popular e-commerce, social-media and gaming platforms for the benefit of the country’s consumers and give Russian small and medium-sized businesses greater access to both local and international markets – has closed, the e-commerce giant said Wednesday.

First announced in September 2018, Alibaba-ownedAliExpress, which is Russia’s most-popular shopping site, along leading Russian internet company Mail.ru Group, Russian mobile-telecommunications operator MegaFon andsovereign-wealth fund Russian Direct Investment Fund (RDIF) have joined 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.

Russia’s Federal Antimonopoly Service last June had cleared the JV to move forward. Now, AliExpress Russia JV is majority owned by Russian shareholders, with with a board of directors comprising executives from RDIF, Alibaba Group, MegaFon and Mail.ru Group. Mail.ru Group CEO Boris Dobrodeev is chairman of the board, while AliExpress Russia Head Liu Wei and First Deputy Chief Executive Officer of Mail.ru Group Dmitry Sergeev will serve as co-CEOs of the JV.

“Alibaba remains focused on fulfilling our mission ‘to make it easy to do business anywhere.’ The AliExpress Russia JV is an important part of Alibaba’s globalization strategy, and a key step toward our long-term goal to help 10 million small businesses reach profitability and serve 2 billion customers worldwide,” said Alibaba Group Executive Chairman and CEO Daniel Zhang.

“Together with Mail.ru Group, RDIF and MegaFon, we are committed to accelerating development of the digital consumer economy of Russia and CIS countries by enabling regional brands and SMEs to reach and serve their target consumers through our unique and innovative shopping experience,” Zhang said.

In addition to the regulatory approval in June, the companies had signed “definitive documents” in Moscow to transition the JV to majority-Russian ownership but with a board of directors made up of representatives from all of the JV companies. Also, one co-CEO would be nominated by Alibaba and a second by Mail.ru Group. Alibaba had nominated Wei, while Mail.ru nominated Sergeev. They were scheduled to take on their new roles once the transaction closed.

The JV and Mail.ru Group will enter into a strategic cooperation agreement relating to, among other things, traffic and product initiatives. The JV also will promote its services on Mail.ru Group’s platforms through exclusive product-integration and marketing solutions, the companies said.

Mail.Ru Group counts 100 million internet users across its social-media, messaging, email and online-gaming properties, with 90% of all internet users in Russia using at least one of its properties each month. Russia’s two largest Russian social media sites VKontakte and Odnoklassniki and its top email service and are all owned by Mail.ru Group.

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.

The joint venture also plans to participate in the acceleration of Russia’s digital economy by leveraging the parties’ respective strengths in e-commerce, social and digital media, logistics and the local market and help build the future infrastructure of commerce in Russia and globally, they said.

“This partnership is in line with our strategy of bringing together people and businesses, as we will offer customers richer social experience and provide entrepreneurs with a platform for growth,” Mail.ru’s Dobrodeev said when the deal was first announced last year. “This is a major milestone for the Russian e-commerce market, and we believe it will promote the development of the digital economy.”

Each shareholder has agreed to make certain contributions to the JV, including the following:

  • Alibabawill 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.
  • MegaFonwill 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 Groupwill 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.
  • RDIFwill 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.

AliExpress launched in Russia in 2010 to bring a new selection of affordable products to consumers by giving them direct access to the China market. Alibaba later included access to its B2C marketplace Tmall via AliExpress as well.

AliExpressAliExpress RussiaecommerceMail.ruMegaFonRussiaRussian consumerssocial commerce

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