Alibaba Group Holding Ltd (NYSE:BABA) is near acquiring a Beijing-based Android app store Wandoujia, sources said on Thursday. The talks between the two companies finally reached a positive conclusion, after last year’s grudged ending. Back in 2015, the Chinese e-commerce giant made a $1.5 billion offer to take over the Android app store; but talks fell through.
The deal is expected to be worth $200 million, according to the Chinese state media. Wandoujia, which was valued at $1 billion back in 2014 after completing the successful fundraising round led by a collective effort of Japanese SoftBank and Goldman Sachs. The company raised funds worth $120 million, according to reports. SoftBank was the largest stakeholder in Wandoujia; however, after the deal Alibaba will hold that place.
The acquisition is the latest one in Alibaba’s buying spree aiming to touch every sector in China. According to Dealogic, Alibaba has been in acquisitions’ fiesco and invested about $30-40 billion since the past six years in approximately more than 100 companies. “It's a network that is growing rapidly thanks to a slew of ambitious acquisitions,” believe analysts.
In a blog post, Wandoujia CEO Wang Junyu said: “The business would remain independent and we hope that it would become the strongest Android application distribution business.”
Since its fundraising round, Wandoujia has been hit hard by stiff competition from other leading local rivals supported by major Chinese technology companies such as Qihoo 360 and 91 Wireless, owned by Baidu Inc. (NASDAQ:BIDU). Baidu is China’s largest search engine with over 80% market share in the mainland territory.
The support of the Chinese e-commerce giant is likely to help the Android store in restoring stability. According to several reports, the company also faced serious internal conflicts and analysts have also raised questions over the company’s $1 billion valuation, as a result of the stiff competition and heavy internal conflicts.
According to China Daily: “It is not clear why its valuation has plummeted, although the store has faced [an] “internal strife” and outside competition as smartphone makers like Huawei and Xiaomi set up their own rivals.” However, the recent deal should assist it in waving off such uncertainties, according to some industry experts.
On the other hand, the acquisition is likely to help Alibaba Group to expand its operations into the highly potential local mobile app distribution market. Wandoujia, which is to be incorporated in Alibaba’s mobile business unit holds about 300 million users, according to report published back in 2014. The company also specializes in mobile search and content products.
In addition, with local rivals including Baidu already operating in the market, Alibaba is likely to boost the competition to a greater level. Baidu holds nearly 27.5% of the market followed by Tencent Holding with a 19.4% share. The acquisition will allow the Chinese e-commerce giant to compete with two of its arch rivals and makes the market more competitive.
According to NewZoo, Wandoujia stands on the 10th position in the leading Chinese app stores with approximately 4% market share. Back in January 2016, Wandoujia was ranked as China’s fifth mobile app store with about 5.7% market share. The rapid decline in such a short span of time shows that the company needs to take strict measure to restore its lost name.
Following a ban on Google Play, the Chinese domestic mobile app market is ruled by various independent Android stores. Being the world’s largest smartphone market, there is enough room for growth for the new players. Alibaba would come up to the task and make the most out of this opportunity.
Alibaba holds strategic importance and has played a key role in improving the overall Chinese economic growth, which dropped down below 7% for the first time in 25 years, last year. Similarly, the Chinese e-commerce giant has implied that its ambition for investments and merger and acquisitions (M&A), depends on strategic and not financial needs. According to some analysts: “if you live in China, chances are you can’t avoid Alibaba.”