Alibaba Group Holding Ltd (NYSE:BABA) and Lazada Group S.A. announced that Alibaba entered into an agreement to acquire a controlling stake in Lazada, a leading eCommerce platform in Southeast Asia. The transaction consists of an investment of approximately USD500 million in newly issued equity capital of Lazada and acquisition of shares from certain shareholders of Lazada, for a total investment by Alibaba of approximately USD1 billion. The transaction is expected to help brands and distributors around the world that already do business on Alibaba’s platform, as well as local merchants, to access the Southeast Asian consumer market.
Lazada currently operates eCommerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. These six countries combined have a population of approximately 560 million and an estimated Internet user base of 200 million, according to Internet Live Stats. With only 3% of the region’s total retail sales conducted online, Southeast Asia is expected to offer tremendous growth potential to both companies as internet penetration continues to rise.
“Globalization is a critical strategy for the growth of Alibaba Group today and well into the future,” said Michael Evans, President of Alibaba. “With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation for future growth in one of the most promising regions for eCommerce globally. This investment is consistent with our strategy of connecting brands, distributors and consumers wherever they are and support our ecosystem expansion in Southeast Asia to better serve our customers.”
Max Bittner, CEO of Lazada Group added, “We are very excited about joining forces with Alibaba and see significant synergies that will drive great benefits to our customers in Southeast Asia. Southeast Asia is an attractive mobile-driven consumer market that is highly fragmented and diverse with significant barriers to entry and a nascent modern retail sector that has large headroom for growth. The transaction will help us to accelerate our goal to provide the 560 million consumers in the region access to the broadest and most unique assortment of products. Furthermore, leveraging Alibaba’s unique knowhow and technology will allow us to rapidly improve our services and provide an even more effortless shopping and selling experience.”
In connection with the transaction, Alibaba entered into a put-call arrangement with certain Lazada shareholders, giving Alibaba the right to purchase, and the shareholders the right to sell collectively, their remaining stakes in Lazada at fair market value during the 12 to 18 month period after the closing of the transaction.
Founded in 2012, Lazada is the one-stop eCommerce gateway for local and international brands and distributors to consumers in six distinct Southeast Asian markets: Indonesia, Malaysia, the Philippines, Singapore Thailand and Vietnam. By combining its regional presence with locally tailored capabilities in areas such as supply-chain, last-mile delivery and payment, Lazada has developed a unique solution for global brands and distributors wanting to enter this rapidly growing region.
Credit Suisse (Hong Kong) Limited acted as exclusive financial advisor to Alibaba and Goldman Sachs (Asia) LLC as exclusive financial advisor to Lazada. (Original Source)
Shares of Alibaba closed yesterday at $77.71, up $0.24 or 0.31%. BABA has a 1-year high of $95.06 and a 1-year low of $57.20. The stock’s 50-day moving average is $74.01 and its 200-day moving average is $74.23.
On the ratings front, Alibaba has been the subject of a number of recent research reports. In a report issued on March 28, J.P. Morgan analyst Vivian Hao maintained a Buy rating on BABA, with a price target of $88, which represents a potential upside of 13.2% from where the stock is currently trading. Separately, on March 24, Deutsche Bank’s Alan Hellawell maintained a Buy rating on the stock and has a price target of $102.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Vivian Hao and Alan Hellawell have a total average return of 4% and 25% respectively. Hao has a success rate of 66.7% and is ranked #1027 out of 3787 analysts, while Hellawell has a success rate of 50.0% and is ranked #162.
Overall, one research analyst has assigned a Hold rating and 14 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $90.55 which is 16.5% above where the stock closed yesterday.