Alibaba signs US$2 billion Russia JV with Kremlin-backed fund and billionaire Usmanov’s Mail.ru

Alibaba Group Holding Ltd. is setting up a US$2 billion joint venture with a Kremlin-backed fund and billionaire Alisher Usmanov’s Mail.ru Group Ltd. to grow its e-commerce business in Russia.

Asia’s most valuable company signed an accord on Tuesday with the Russian Direct Investment Fund and Mail.ru to establish AliExpress Russia, which the local investors will collectively control. Alibaba will fold the domestic operations of its online marketplaces Tmall and AliExpress into the venture, while Usmanov’s MegaFon PJSC will sell its 10 per cent stake in Mail.ru – worth roughly US$486 million at Monday’s close – to Alibaba in return for 24 per cent of the venture. That deal values the new outfit at roughly US$2 billion.

Alibaba, which is steadily expanding its reach beyond China as part of a global expansion, will access Mail.ru’s large audience through two of the country’s most popular social networks. The Russian company will prove a key ally in a major market: it recently invested in online food-delivery and ride-hailing and rolled out Pandao, a mobile platform for selling Chinese goods.

“A big part of what we’ve been able to develop so far in Russia has been our cross-border business,” Alibaba President Mike Evans told reporters. “But the future, which will require the presence of our partners at this table, will involve building a much bigger local business.”

Pandao will also get folded into the Alibaba venture. The Russian Direct Investment Fund will add an unspecified amount of funding in return for a 13 per cent stake, while Mail.ru holds the remaining 15 per cent.