Why Alibaba Is Acquiring Kaola For $2 Billion

By Annie Baker ● September 11, 2019
  • Alibaba recently announced that it is acquiring Kaola from Chinese internet company NetEase for about $2 billion. These are the details behind the deal.

Alibaba recently announced it was acquiring e-commerce company Kaola from Chinese internet company NetEase for about $2 billion. Kaola is known as being one of the biggest Chinese e-commerce sites, which sells imported products including clothes, consumer electronics, and sports accessories.

With Kaola, Alibaba is planning to continue operating independently under its current brand. And Tmall Import and Export General Manager Alvin Liu is going to take the CEO role.

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Alibaba is going to gain a substantial market share in the cross-border e-commerce sector with Tmall Global and Kaola.

“Alibaba is confident about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential. We welcome Kaola to the Alibaba family and value NetEase’s contributions in incubating an e-commerce platform with strong import capabilities. With Kaola, we will further elevate import service and experience for Chinese consumers through synergies across the Alibaba ecosystem,” said Alibaba CEO Daniel Zhang. “Alibaba also looks forward to becoming a partner in the future development of NetEase Cloud Music and exploring innovative collaboration in the digital entertainment space.”

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Alibaba had reported strong revenue and earnings for its June quarter. But sales growth was slowing down. The annual active consumers on Alibaba’s China retail marketplaces hit 674 million, which is an increase of 20 million and most of the new consumers were from less developed cities.

In a separate deal, Alibaba and Yunfeng — the investment firm founded by Alibaba founder Jack Ma — also said it is going to invest $700 million into NetEase Cloud Music’s latest funding round. As a result, it will give Alibaba a minority stake in the streaming music service. And NetEase will remain the controlling shareholder.

“We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services. At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages. We remain fully committed to offering our users best-in-class and differentiated online content born from our relentless drive for craftsmanship and innovation,” said NetEase CEO William Ding. “As the controlling shareholder of NetEase Cloud Music, we will continue to fully support the growth of this business, helping it to realize its strategic goals in the music industry.”

 

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