Rocket, Kinnevik exit as Alibaba pumps $1b into Lazada

The Chinese e-commerce giant said the deal values Lazada at $3.15 billion, more than twice the valuation at which it first invested in April 2016. Rocket Internet is selling its remaining 8.8% stake for $276 million, while Kinnevik will receive $115 million for a 3.6% holding. Tesco is also said to be exiting its 8.3% interest, leaving Temasek Holdings and Lazada management as the only non-Alibaba shareholders.

Lazada has operations in Singapore, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, representing a combined market of approximately 560 million consumers, yet only 3% of the region’s total retail sales are transacted online. According to a study by Google and Temasek, e-commerce in Southeast Asia will be worth $88 billion by 2025, up from $5.5 billion in 2015.

Alibaba claims that its scale and expertise have helped Lazada develop its marketplace, technology, payments, and logistics capabilities, leading to improvements in service quality and customer experience.

“As a market leader, Lazada has demonstrated its ability to execute and further lead the region in products and services with the best consumer experience in Southeast Asia while growing a strong ecosystem that supports small businesses going online,” said Daniel Zhang, CEO of Alibaba Group, in a statement. He added that Alibaba will continue to put resources to work in the region through Lazada.

Strategic moves since the Chinese company’s initial investment include the purchase of Singapore-based online grocer RedMart, which was looking to expand into other markets but was said to be struggling to raise the necessary capital. The acquisition provided an exit for several venture capital investors.

Lazada was set up in 2012 by Rocket and operated in Southeast Asia alongside Zalora, an e-commerce platform focused on apparel, shoes, accessories and beauty products. The company went on to raise more than $700 million, including a Temasek-led round in 2014 for EUR200 million ($249 million) and a $250 million commitment in 2013 from Tesco, Access Industries, Kinnevik and Verlinvest.

However, by the time Alibaba pumped $1 billion into the business last year – half in new shares – Lazada was said to be nearly bankrupt or technically bankrupt, having invested heavily in scale but yet to see a return. Temasek didn’t exit any of its shares in that transaction, but several other investors did.

Rocket sold a 9.1% stake for $137 million, Kinnevik received $57 million for a 3.8% holding, and Tesco exited an 8.6% position for $129 million. Alibaba had the right to purchase, and the selling shareholders had the right to sell, their remaining stakes at a fair market value in the 12-18 month period after the close of the transaction.

Kinnevik said it expected to generate a 2.9x cash multiple and a 33% IRR on an investment in Lazada of SEK503 million ($58.8 million). Rocket, which committed EUR18 million to the company, said it would realize an overall multiple of 20x.

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• Topics
• Southeast Asia
• Greater China
• Technology
• Consumer
• Trade sale
• China
• TMT
• Alibaba Group
• Rocket Internet
• Exit