Alibaba acquires Netease Kaola for USD 2 bln to boost Tmall’s foreign imports
Sep 05, 2019 (China Knowledge) - Alibaba Group (BABA), China’s e-commerce giant will complete the acquisition of NetEase Kaola this week. The price of acquisition is at USD 2 bln, and this transaction will include a mix of cash and shares.
For several weeks, there were numerous news and reports about the two companies in the deal making. Since last month there were many news reported that the two companies may not come into agreement on the acquisition. On the other hand, Amazon was also looking at the platform earlier this year before it decided to close its Chinese online store.
The acquisition appears to make sense for both sides. Despite Kaola’s impressive growth, its parent company NetEase (NTES), known for its gaming and online entertainment business, has been looking to sell its e-commerce unit for most of the year. The cross-border e-commerce opportunity is huge, but Kaola has its share of problems. It requires a lot of resources to build up supplies but doesn’t have a profit margin, and this makes selling Kaola isn’t a bad choice for NetEase when the price is right.
NetEase Kaola will merge into Tmall’s import and export business unit but remains as a discrete brand. Buying Kaola helps to remove competition for Albaba in its own turf. Though there is the ongoing trade disputes and downward economic pressure, Chinese consumers still maintain strong interests and huge demand in foreign brands.
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