Exclusive | Alibaba to complete USD 2 billion buyout of NetEase Kaola this week

The tech giant also eyes investment in NetEase Music to leapfrog the competition.

Photo: Stock.tuchong.com

E-commerce behemoth Alibaba is set to wrap up its USD 2 billion acquisition of NetEase’s cross-border retail platform Kaola within this week, 36Kr has learned from people close to the deal on Wednesday, marking a drastic reversal in the deal’s eventful development from last month when the buyout talk was reportedly falling apart.

After the deal, Kaola is expected to retain its brand and operate under Alibaba’s premium business-to-consumer shopping platform, Tmall. Alibaba will appoint Liu Yiman, a senior director at Tmall Global, as Kaola’s CEO, sources said.

On August 20, several Chinese news outlets reported that the deal between the two companies was called off citing NetEase founder and CEO Ding Lei’s dissatisfaction with Kaola’s valuation offered by Alibaba.

It’s understood that instead of being an all-cash USD 2 billion deal as earlier reported, the acquisition could now be either in a combination of cash and shares, or cash and assets.

Both Alibaba and NetEase declined to comment when contacted by 36Kr.

China’s cross-border e-commerce market hit USD 1 trillion in transactions in the first quarter of 2019, according to Chinese market intelligencer Analysys. 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.

This is not the first time Alibaba drooling over a new business incubated by NetEase, one of the country’s largest game developers.

Alibaba is also said to have shown interests in NetEase’s music service since its Xiami Music has been lagging behind in China’s online music scene, dominated by Tencent’s matrix of music services.

In March, Tencent-backed Kugou, QQ music, We Sing and Kuwo were the four most popular music apps in China, with 2.64 billion, 1.96 billion, 1.72 billion and 1.48 billion monthly active users (MAUs) respectively, according to Chinese big data provider QuestMobile.

NetEase Music ranked fifth with slightly over 1.3 billion MAUs. Its year-on-year increase of 27.5% was the fastest growth among the five players. The company has plans for an initial public offering after recent two rounds of fundraising.

Correction: An earlier version of the story incorrectly stated the acquisition amount to be USD 20 billion, it should be USD 2 billion.

36Kr is KrASIA’s parent company