Alibaba Close to Acquiring E-commerce Rival NetEase Kaola

Chinese e-commerce giant Alibaba is in talks with NetEase to acquire its cross-border e-commerce platform Kaola. Once the two agree on final details, Kaola would merge with Alibaba‘s cross-border arm Tmall, according to LatePost on Aug. 14.

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For Alibaba, this deal could not only augment the company’s competitiveness in terms of cross-border e-commerce, but also fend off its rival Pinduoduo, a Chinese e-commerce platform which also showed interest in acquiring Kaola.

A merger between the China’s top two cross-border e-commerce platforms would create a dominant market giant. According to report from research institute Analysys, Tmall International supported by Alibaba took up 32.3% of China’s cross-border e-commerce market in the first quarter this year, followed by NetEase Kaola with 24.8%. Once the acquisition completed, the total market share would reach 57.1%, securing them a leading position in the industry.

Although both parties involved in the deal declined to comment on the matter, NetEase has been trying to sell its cross-border branch or attract investment over the past few months.

“NetEase has always been open-minded in seeking business development opportunities and strategic business partners to bring more vitality to NetEase’s cross-border e-commerce and other business units,” said Yang Zhaoxuan, chief financial officer at NetEase, during the company’s Q1 earnings call.

Earlier in February, NetEase was negotiating with Amazon China to merge their overseas purchase business. However, because Amazon asked for a price that was too high and Kaola had financial restraints, as LatePost put it, the plan didn’t come off.

Pinduoduo also intended to acquire Kaola. The company wanted to introduce a more convincing and quality e-commerce platform to enhance its reputation, a person familiar with this matter told LatePost.