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Alibaba Forms JV For E-commerce Platform In Russia

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Chinese e-commerce giant Alibaba Group Holding Ltd. (BABA) said Tuesday that it will form a joint venture in Russia with several Russian companies for an e-commerce platform in the country. The new platform will integrate Russian e-commerce, social-media and gaming platforms.

The formation of the social-commerce joint venture was announced at the Eastern Economic Forum or EEF in Vladivostok, Russia.

As part of the new strategic partnership, Alibaba's local e-commerce unit AliExpress and Russian Internet company Mail.Ru Group will join forces to create a one-stop destination for consumers to communicate, socialize, shop and play games, all within the same online ecosystem.

The partnership will be backed by sovereign-wealth fund Russian Direct Investment Fund or RDIF, and Russian telecommunications company MegaFon, which owns 10 percent of Mail.Ru Group.

Mail.Ru Group has 100 million internet users across its social-media, messaging, email and online-gaming properties. It also owns Russia's top email service, two Russian social media sites - VKontakte and Odnoklassniki - and food delivery business Delivery Club.

Alibaba noted the joint venture will enable Russia's small and medium-sized enterprises to tap a newly connected ecosystem in the domestic market and also provide them access to over 600 million consumers who use Alibaba's platforms in China, India, Southeast Asia, Turkey, and Europe.

Alibaba will cede control of its Russian business to form the partnership. Upon completion of the deal, Alibaba will control only 48 percent of AliExpress Russia, while MegaFon will own a 24 percent stake, Mail.ru will hold a 15 percent stake and RDIF will own 13 percent.

MegaFon will sell its 10 percent stake in Mail.Ru Group to Alibaba in exchange for a stake in the joint venture.

The new JV-controlled AliExpress Russia will comprise Alibaba's domestic and cross-border operations in the country, including those of AliExpress and Tmall. Alibaba said it plans to inject an undisclosed amount of cash into the joint venture.

The transaction is expected to close in the first quarter of 2019.

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