Alibaba and NetEase Kaola deal off the table

Alibaba’s rumored acquisition of Kaola, NetEase’s cross-border e-commerce business, has reportedly fallen through after the two companies failed to agree on details, Chinese media reported, citing people familiar with the matter.

Why it’s important: A merger of Tmall Global and Kaola, China’s two largest cross-border platforms, would have resulted in a clear-cut leader of the fragmented cross-border segment and consolidated Alibaba’s dominance in the country’s e-commerce industry.

• The failure opens possibilities for Alibaba rival Pinduoduo, which is trying to tap higher-tier city markets.

Details: The talks collapsed after NetEase founder and CEO Ding Lei vetoed Alibaba’s offer, according to Tech News.

• The talks broke down because NetEase was not satisfied with the price, an unnamed source said.
• In addition to Kaola, the deal was said to also include NetEase Music and NetEase’s research and development unit.
• NetEase is reshuffling its e-commerce business including Kaola and own-label platform Yanxuan as growth has slowed.

Alibaba declined to comment on the matter when reached by TechNode on Friday. NetEase also declined to comment to Chinese media outlets.

Context: NetEase previously held talks with Amazon to acquire its China operations over several months, but the deal fell through after the two companies failed to agree on final terms.

• Pinduoduo’s gross merchandise volume from Tier One and Two cities as a percentage of total GMV has risen to 48% in June from 37% in January this year, the company’s CEO said during its second quarter earnings call on Wednesday.