Alibaba acquires NetEase Kaola for $2b

Alibaba Group Holding Ltd said on Friday it has acquired NetEase Kaola, the cross-border e-commerce platform of NetEase Inc, for $2 billion, as the e-commerce giant seeks to bolster its efforts to cater to local demand for quality products from abroad.

Alibaba plans for Kaola to continue to operate independently under its current brand, while Alvin Liu, Tmall import and export general manager, will serve as Kaola's new CEO, Alibaba said in a statement.

Alibaba and NetEase also agreed for Alibaba, along with Yunfeng Capital, a private equity firm backed by Alibaba founder Jack Ma, to invest approximately $700 million in NetEase Cloud Music. This will give Alibaba a minority stake in the streaming music service, with NetEase remaining as its controlling shareholder.

Alibaba’s Tmall Global and Netease Kaola are China’s largest and second-largest cross-border e-commerce platforms, holding 31.7 percent and 24.5 percent of the market respectively in 2018, according to the Beijing-based consultancy Analysys.

"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,” said Daniel Zhang, CEO of Alibaba Group.

“With Kaola, we will further elevate the import service and experience for Chinese consumers through synergies across the Alibaba ecosystem.”

He added 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.

"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,” said Ding Lei, founder and CEO of NetEase.

Ding said the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow the company to best leverage its competitive advantages.

"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."