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Alibaba Scoops Up Southeast Asian E-Commerce Start-Up Lazada

Alibaba is making headway in the east—the Chinese e-commerce giant will spend about $1 billion on a controlling stake in e-tail start-up Lazada to dominate in Southeast Asia, too.

The deal is Alibaba’s biggest acquisition to date and brands, retailers and local merchants across the globe that already use Alibaba’s platform are expected to benefit from access to the Southeast Asian consumer market.

Right now, Lazada, which started up in 2012 as a one-stop e-commerce gateway for local and international brands, operates in six markets: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Combined, the countries have a population of roughly 560 million, 200 million of which are on the Internet, according to Internet Live Stats.

Internet use for commerce is on the rise everywhere, but with only 3 percent of Southeast Asia’s total retail sales done online, the region could offer considerable growth potential.

“Globalization is a critical strategy for the growth of Alibaba Group today and well into the future,” Alibaba President Michael Evans 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.”

Lazada CEO Max Bittner agreed, adding that the deal will drive “great benefits” to its customers.

“Southeast Asia is an attractive mobile-driven consumer market that is highly fragmented and diverse with significant barriers to entry and a nascent modern retail sector that has large headroom for growth,” Bittner said. “The transaction will help us to accelerate our goal to provide the 560 million consumers in the region access to the broadest and most unique assortment of products.”

As part of the transaction, Alibaba also entered into an arrangement with certain shareholders that gives Alibaba the right to purchase—and the shareholders the right to sell collectively—their remaining stakes in Lazada at fair market value for the 12 to 18 months after the deal closes.

“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,” Evans said.