11 September 2018
Russian Direct Investment Fund (RDIF), Russia's sovereign wealth fund; Alibaba Group (NYSE:BABA), world leader in e-commerce; MegaFon, all-Russian digital operator, and Mail.Ru Group (MAIL:IL), Russian leading Internet and IT company that is now building up its presence on foreign markets, have announced a strategic partnership resulting in the largest social commerce joint venture in Russia and CIS aiming at integration of key consumer Internet and e-commerce platforms in Russia.
The joint venture formed by this partnership will be partly based on the current AliExpress business in Russia. The parties will consolidate strategic assets and invest new capital, management, resources and expertise to create unprecedentedly favourable terms for retailers, consumers and Internet users in Russia and CIS, as well as to speed up the growth of rapidly developing Russian digital economy.
Terms of the deal and ownership structure of the joint venture:
● Alibaba Group will make its AliExpress business in Russia a part of the new joint venture (JV) that will incorporate current local and cross-border operational assets of Alibaba Group in Russia, including the business of international e-commerce platform AliExpress and Russian B2C platform Tmall. Alibaba Group will further invest cash and other resources into JV to maintain its functioning.
● RDIF will become a strategic shareholder of AliExpress Russia by acquiring a 13% share through investing capital and buying an additional share of JV from Alibaba Group.
● MegaFon will sell its 10% share of Mail.Ru Group to Alibaba Group for a 24% share in AliExpress Russia.
● Mail.Ru Group will transfer to JV its e-commerce business Pandao, cash and distribution in the format of integration with Mail.Ru Group products. Its share in AliExpress Russia will be 15%.
● AliExpress Russia and Mail.Ru Group will sign an agreement on strategic cooperation that implies, among other terms, exchange of traffic and product initiatives.
● As part of JV, the parties plan to expand the ecosystem and opportunities for everyday use of the service as a result of investment into other businesses together with Mail.Ru Group, including FoodTech and other branches.
● After all transactions subject to customary closing conditions and respective corporate approvals are finalized, AliExpress Russia will be owned by Alibaba Group (48%), MegaFon (24%), Mail.Ru Group (15%) and RDIF (13%). JV will operate in all sectors of e-commerce, including cross-border and local market places as well as own direct sales.
Key strategic advantages of AliExpress Russia:
● Use of synergy of social services and commerce. Partnership with the leading Russian Internet platform will open to AliExpress Russia the access to 100 million users of Mail.Ru Group in social networks, messengers, email service and online games. Access to this unique platform and users will give JV the opportunity to occupy a significant place in the value chain of Russian consumers’ lifestyle by creating a consolidated platform for social communication, games and purchases.
● Increase of consumption in Russia. AliExpress Russia will reinforce the global ecosystem of Alibaba Group offering the consumers a unique choice of high-quality products with a wide price range from Russia, China and other countries.
● Support of SMEs in Russia. JV will create massive opportunities for Russian small and medium businesses. They will gain access to a vast ecosystem that allows local entrepreneurs sell goods in their country and abroad. Alibaba platforms are used by over 600 million consumers; therefore, Russian SMEs will get access to the market that is four times bigger than the Russian population and includes consumers from China, Southeast Asia, Turkey, Europe, India and other countries.
● Fostering the development of Russian digital economy. Due to the unique advantages of each party of the agreement and their experience in e-commerce, social networks and digital media, logistics and working with local market, this partnership will speed up the development of digital economy in Russia and provide a foundation for long-term technological cooperation and building up the commerce infrastructure in Russia and in the world.
Kirill Dmitriev, Chief Executive Officer, Russian Direct Investment Fund:
“RDIF is happy to announce the creation of this unprecedented partnership. The new company will combine the advantages of Russian and Chinese businesses. This is a unique example of technological cooperation of our countries. We hope that best technologies, experience and possibilities will make JV the incontestable leader on the Russian e-commerce market offering reasonably priced goods to Russian consumers and opportunities for the Russian business to compete on the international market. Our investment is an example of RDIF leadership in the digital transformation of Russia.”
Michael Evans, President, Alibaba Group:
“This partnership is a key stage of the international expansion of Alibaba. It will allow to consolidate the leaders of the local market with our global ecosystem. By partnering with Russia’s leading consumer internet platform, AliExpress Russia will help digitize and transform the retail value chain in Russia, enabling a seamless and innovative experience for consumers as well as creating significant opportunities for Russian entrepreneurs and SMEs to grow in their home market and expand globally. Our experience in China and other markets around the world makes us uniquely qualified to help build the future infrastructure of commerce in Russia and neighboring countries.”
Sergey Soldatenkov, Chief Executive Officer, MegaFon:
“MegaFon is pleased to become partners with global technology leaders, Alibaba Group, RDIF and Mail.Ru Group. This agreement entirely complies with our digital strategy ‘Driving the digital world’ aimed at creating new opportunities for over 76 million clients. E-commerce seamlessly blends into our rapidly developing ecosystem of partner relations for best offers in finance, media and other client services. The partnership provides unprecedented access to the Russian consumer base, which is advantageous for all parties.”
Boris Dobrodeev, Chief Executive Officer (Russia) Mail.Ru Group:
“Mail.Ru Group is happy to become a strategic partner of AliExpress Russia: it will allow to create a unique social e-commerce offer for our users. Together we will focus on development of existing products as well as integration of products in social networks. Most Russian consumers are already our users, and this partnership will enable us to significantly increase the access to various segments of the e-commerce offering, including both cross-border and local merchants. The combination of our ecosystems allows us to leverage our distribution through our merchant base and goods as well as product integrations.”
The deal is expected to be closed in the first quarter of 2019.
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