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Alibaba’s Russia Joint Venture Takes Shape

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Jun. 27 2019, Published 3:23 p.m. ET

Alibaba investing $100 million cash in its joint venture

The e-commerce joint venture that Alibaba (BABA) and its partners in Russia formed last year has begun to take shape. The joint venture, known as AliExpress Russia, brings together Alibaba, Russia’s sovereign wealth fund, RDIF, mobile network operator Megafon, and Internet services company Mail.ru Group.

Russian news agency Tass reported early this month that Alibaba and RDIF would each inject $100 million into the joint venture and that Alibaba would also contribute its existing AliExpress business in Russia to the venture. The joint venture will be owned 24.3% by Megafon, 51% by Mail.ru, and 12.9% by RDIF, with Alibaba likely controlling the remaining 47.8% stake. RDIF has the option of investing $194 million more to purchase a larger stake in the joint venture. If it decides to exercise this option, it would buy the stake from Alibaba.

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Alibaba pursuing a broader international footprint

According to Alibaba, the joint venture will allow it to accomplish in Russia what it couldn’t do on its own. The Russian joint venture is part of Alibaba’s efforts to broaden its international presence as the company looks to overseas markets to support its growth, as it’s dominated the Chinese market, and e-commerce growth in China’s major cities has slowed. Alibaba’s domestic rival JD.com (JD) is also expanding overseas. JD has also favored partnerships in its battles with Alibaba in and outside China.

A year ago, JD partnered with Google (GOOGL) to help it expand into more international markets. JD is also backed by Tencent (TCEHY) and Walmart (WMT). Last year, Tencent persuaded Walmart to drop Alibaba’s Alipay for its WeChat Pay service for mobile payments in its stores in western China.

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