Alibaba’s USD 2 billion acquisition of NetEase’s cross-border e-commerce site is off, reports say

NetEase believes Kaola was “undervalued.”

Though Alibaba was in talks with NetEase to acquire the cross-border e-commerce platform Kaola, the two companies failed to agree on a price and the deal is off, multiple Chinese news sites reported this week.

During a meeting on Tuesday, NetEase founder and CEO Ding Lei vetoed Alibaba’s offer, according to Tencent News, which cited people familiar with the matter. The talks broke down because NetEase was not satisfied with the valuation of Kaola, the report said.

Both companies declined to comment when contacted by KrASIA on Thursday.

Alibaba was planning to acquire NetEase Kaola for USD 2 billion in cash and merge it into its own Tmall Global, Caixin reported last week. This was originally part of Alibaba’s strategy to strengthen its position in China’s burgeoning cross-border shopping sector, a 36Kr article said. More and more consumers in the country are looking to vendors that are overseas to seek out authentic cosmetics, infant formula, electronics, and health supplements.

China’s cross-border e-commerce market hit USD 1 trillion in transactions in the first quarter of 2019, according to Analysys Yiguan. Alibaba-backed Tmall Global was the top player with a market share of 32%, followed by Kaola’s 25%. JD Worldwide and Vipshop International followed with 12% and 9%, respectively.

NetEase’s e-commerce business consists of Kaola and Yanxuan, a platform that sells its own branded products. Its e-commerce business has seen declining growth since the beginning of 2018. In the second quarter of this year, Kaola and Yanxuan generated USD 764 million in combined revenue, and an increase of 20% year-on-year, though this lags far behind a 175% surge recorded in the fourth quarter of 2017.

36Kr is KrASIA’s parent company.