Alibaba and setup for $2 billion joint venture

Tinuku - Alibaba Group Holding Ltd. is setting up a US$2 billion joint venture with billionaire Alisher Usmanov’s internet services firm Group Ltd. to strengthen the Chinese company’s foothold in Russian e-commerce.

Asia’s most valuable company signed an accord Tuesday with to merge their online marketplaces in the nation of more than 140 million people. The deal is backed by the Kremlin through the Russian Direct Investment Fund and the local investors will collectively control the new business.

Tinuku Alibaba and setup for $2 billion joint venture’s global depository receipts traded in London jumped as much as 12 percent. The combined company will be better able to compete with local rivals Wildberries and Yandex. Alibaba’s Russian unit AliExpress mostly sells goods imported from China and hasn’t had to worry about competition from Inc. because the US behemoth has little presence in the country.

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

Alibaba will fold its Russian operations including AliExpress and Tmall into the venture, while Usmanov’s MegaFon PJSC will sell its 10 percent stake in, worth roughly US$486 million at Monday’s close, to Alibaba in return for 24 percent of the business. That deal values the new outfit at roughly US$2 billion. will bring its mobile marketplace for Chinese goods, Pandao, into the new company, which will also get direct access to users of two popular Russian social networks owned by

The Russian Direct Investment Fund will add an unspecified of funding in return for a 13 percent stake, while will hold the remaining 15 percent.’s GDRs were up 9.3 percent at 12:34 pm in London.

The parties inked the deal at a Vladivostok economic forum attended by president Vladimir Putin and Alibaba Chairman Jack Ma. The Chinese company had been negotiating a similar deal with Sberbank PJSC, Russia’s largest bank, but abandoned talks after the lender partnered with Yandex NV instead.

Alibaba recently rolled out Tmall for Russia after winning consumers through AliExpress. Ma, who started in 1999 as a business-to-business marketplace with 17 co-founders. His company last year saw daily package deliveries reach 55 million.