Alibaba, the world’s largest e-commerce company, has acquired a controlling interest in Singapore-headquartered Lazada, Southeast Asia’s largest online department store.

Alibaba Group Holding and Lazada Group SA said in a statement that the transaction consists of an investment of approximately US$500 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 US$1 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 e-commerce stores 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 three per cent 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.

“Globalisation is a critical strategy for the growth of Alibaba Group today and well into the future,” said Michael Evans, Alibaba’s president.

“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 said joining forces with Alibaba would see significant synergies that will drive “great benefits” to its customers.

“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 know-how 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.

Credit Suisse (Hong Kong) Limited acted as exclusive financial advisor to Alibaba and Goldman Sachs (Asia) as exclusive financial advisor to Lazada.

This story first appeared on Inside Retail’s sister site, Inside Retail Asia.

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