Under the deal, Alibaba will contribute an unspecified amount of cash and its existing business in the country, AliExpress Russia.
The deal was announced in a joint statement during the Eastern Economic Forum, an event in Vladivostok where Chinese President Xi Jinping met Russian President Vladimir Putin.
Under sanctions from Europe and the United States, Russia has been looking to build closer political and business ties with China. Beijing in turn wants to extend its economic influence across Asia and Europe through its ambitious Belt and Road initiative.
That involves building infrastructure, such as ports and railways, and also developing a “digital Silk Road” through high-speed internet networks and e-commerce.
If the transaction is approved, Alibaba will own 48% of AliExpress Russia, while MegaFon will control 24%. Mail.Ru Group, which is putting its Pandao online shopping business into the joint venture, will own 15%, and Russia’s sovereign wealth fund will have 13%.
The Russian market has plenty of potential to grow. Regional trade group ECommerce Europe estimated in 2016 that just 20% of Russians shop.
Online sales in the country reached €20.5 billion ($24 billion) in 2015.
Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), noted: “RDIF is proud to announce the creation of this breakthrough partnership. The new JV will combine the advantages of Russian and Chinese businesses and become a unique and unrivaled example of technological cooperation between our countries. We hope the JV will become the undisputed leader in Russian e-commerce due to the combined best technologies, expertise and capabilities that will grant Russian customers access to affordable goods, and empower Russian SMEs to compete globally. Our investment is an example of RDIF’s leadership in digital transformation of Russia.”
Michael Evans, President of Alibaba Group, said: “This partnership is an exciting step in Alibaba’s international expansion, combining local leadership with our global ecosystem. By partnering with Russia’s leading consumer internet platform, AliExpress Russia will help digitize and transform the retail value chain in Russia, enabling a seamless and innovative experience for consumers as well as creating significant opportunities for Russian entrepreneurs and SMEs to grow in their home market and expand globally. Our experience in China and other markets around the world makes us uniquely qualified to help build the future infrastructure of commerce in Russia and the CIS.”
Sergey Soldatenkov, CEO of MegaFon, commented: “MegaFon is pleased to enter into this partnership with global technology leaders Alibaba Group, RDIF and Mail.Ru Group. This agreement is in line with our digital strategy of ‘driving digital world’ aimed at creating new opportunities for over 76 million customers. E-commerce is a perfect fit for our rapidly developing ecosystem of partnerships to furnish best-in-class financial services, media, and other consumer offerings. This combination is beneficial for all parties, providing unparalleled access to the Russian consumer base.”
Mail.Ru Group, Boris Dobrodeev CEO (Russia) of Mail.Ru Group, commented: “Mail.Ru Group is very excited to become a strategic partner of AliExpress Russia and create an unparalleled social commerce offering for our users. Together, we will focus on developing existing products as well as integrating them into the social experience of our users. Most Russian consumers are already our users, and this partnership will enable us to significantly increase the access to various segments of the e-commerce offering, including both cross-border and local merchants. The combination of our ecosystems allows us to leverage our distribution through merchant base and goods as well as product integrations”.
The transaction is expected to close in the first quarter of 2019.