Alibaba confirms purchase of Kaola business

Alibaba has confirmed it will buy NetEase’s Kaola for about US$2 billion, a deal widely predicted last month.

Kaola is an import e-commerce platform which has been a rival of Alibaba for some time. Both companies have their roots in Hangzhou.

Confirming the deal, Alibaba says it plans for Kaola to continue to operate independently under its current brand. Tmall import and export GM Alvin Liu will serve as Kaola’s new CEO.

“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 William Ding, CEO of NetEase.

“At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages. We remain fully committed to offering our users best-in-class and differentiated online content born from our relentless drive for craftsmanship and innovation.”

As well as the sale of Kaola, Alibaba, together with Yunfeng, will invest some $700 million in NetEase Cloud Music. The completion of this transaction is subject to certain closing conditions. NetEase will remain the controlling shareholder of NetEase Cloud Music following the closing of this transaction.

“As the controlling shareholder of NetEase Cloud Music, we will continue to fully support the growth of this business, helping it to realise its strategic goals in the music industry,” said Ding.

Alibaba CEO Daniel Zhang said his company is confident about the future of China’s import e-commerce market, which it considers remains in its infancy and has 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. With Kaola, we will further elevate import service and experience for Chinese consumers through synergies across the Alibaba ecosystem,” said Zhang.

“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.”