Russia's sovereign fund signs tech deals with CIC, Alibaba

The Russia-China Science & Technology Fund – announced during the visit of Chinese President Xi Jinping (pictured, with Russian Prime Minister Dymtry Medvedev) to Russia – will have a target corpus of $1 billion. It is intended to support the development and commercialization of new technologies in core sectors of both economies.

RDIF acts as a catalyst for direct investment in the Russian economy. It has already collaborated with CIC on the Russia-China Investment Fund (RCIF), which was established in 2012 with $2 billion in commitments from the two parties. A total of $7 billion has been committed by the fund and its partners to more than 30 projects, according to a statement. The fund allocates 70% of its capital to Russia and former Soviet countries, with the remaining 30% invested in China. 

RCIF has already made several technology investments in China. Its portfolio companies include ride-hailing platform Didi Chuxing, artificial intelligence specialist Megvii technology, and electric vehicle manufacturer Nio. 

The other partners in the social commerce platform are MegaFon, the country’s second-largest mobile phone operator, and Mail.ru Group, a local email service provider that has gone on to provide social networking, instant messaging, online gaming, search, and e-commerce services. The plan is to consolidate interests in consumer internet and e-commerce by combining the strengths of Alibaba-owned online shopping site AliExpress with and Mail.ru’s social and digital businesses. 

Alibaba will contribute $100 million to the joint venture as well as the existing AliExpress assets. MegaFon will sell its 9.97% stake in Mail.ru to Alibaba in exchange for a 24.3% interest in the joint venture, while Mail.ru will receive a 15% stake in return for its Pandao e-commerce business and $182 million in cash. RDIF has agreed to invest $100 million; however, it may acquire additional shares in the joint venture from Alibaba for $194 million.

Alibaba will hold 55.7% of the economic rights and 49.9% of the voting rights once the deal closes. RDIF will have 5% and 1.2% of the economic and voting rights, respectively, although these stakes would rise to 12.9% and 9.6% on exercising the call option.

“This partnership will enable the AliExpress Russia JV to accelerate the development of the digital consumer economy of Russia and CIS countries in ways that no one party could accomplish alone. Together, we are uniquely positioned to offer consumers in Russia and neighboring countries an innovative shopping experience by combining social platforms with commerce, as well as enabling regional brands and SMEs to sell their products locally and globally,” said Daniel Zhang, CEO of Alibaba, in a separate statement.

RDIF was formed in 2011 as Russia’s sovereign wealth fund. It has implemented over 70 projects with foreign partners totaling more than RUB1.5 trillion ($23.2 billion). Its joint strategic partnerships with international co-investors are worth in excess of $40 billion.

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• Topics
• Greater China
• Fundraising
• Technology
• China
• Russia
• CIC
• RDIF
• Alibaba Group
• TMT