Alibaba reportedly nearing a deal to acquire NetEase Kaola for $2 billion

Rumors continue to swirl around Alibaba acquisition of NetEase‘s cross-border retail platform unit, Kaola. After many weeks of media speculations, Alibaba may finally be buying Kaola this week for $2 billion, according to an exclusive report from 36kr.com, which first broke the news. Both Alibaba and NetEase spokespersons declined to comment saying the company does not comment on market rumors.

Founded in 1997 by William Ding, NetEase offers online game services, advertising services, and wireless value-added services in China. Through its its subsidiaries, NetEase engages in online games, internet portals, e-mail, and wireless value-added service businesses in China. It operates through three segments: online game services; advertising services; and e-mail and wireless value-added services. Kaola is NetEase’s self operated cross-border e-commerce platform, online video broadcasting services and insurance products.

China’s cross-border eCommerce market hit $1 trillion in transactions in the first quarter of 2019, 36Kr reported. NetEase has been looking to sell its eCommerce unit fo r most of the year. Earlier this year, Amazon was looking at the platform earlier this year before it decided to close its Chinese online store.

As part of the acquisition, Kaola will merge with Alibaba’s Tmall Global while still operating independently to create a massive cross-border eCommerce business. At the end of last year, Tmall Global held a 31.7 percent share of the market, while Kaola had about 24.5 percent, much larger than rivals JD Worldwide (11.5 percent) and Amazon (6 percent).

The $2 billion acquisition will include a mix of cash and shares. The options held by Kaola employees will also be converted to Alibaba shares, according to 36xr.com, citing people familiar with the deal. Alibaba reportedly will install a new CEO to replace Kaola Head Zhang Lei. Kaola employee stock options will be converted into Alibaba shares.

Caixin Global first reported Alibaba’s Kaola acquisition for $2 billion in cash on Aug.15, but the deal fell apart, according to Wednesday’s report.