INTERNET: Alibaba Eyes Polish C2C, Ant Chases Taiwan Insurance

Bottom line: Alibaba’s bid for Polish C2C site Allegro looks like a smart move into a related developing market, but could be thwarted by rival Tencent, while affiliate Ant Financial’s new Taiwan insurance tie-up also looks smart though relatively small.

Alibaba bids for Poland’s Allegro

E-commerce giant Alibaba (NYSE: BABA) and its Ant Financial affiliate are in a couple of major headlines as the weekend approaches, each focusing on a strategic growth area. In the first case, Alibaba has entered the bidding for a leading Eastern Europe online auctions site, competing with global rival eBay (Nasdaq: EBAY) for Poland’s Allegro. The second deal has Ant, owner of leading electronic payments service Alipay, expanding its financial services holdings with the purchase of a majority stake in the insurance unit of Taiwan’s Cathay Financial (Taipei: 2882).

I’m not a big fan of many of Alibaba’s recent major purchases, many  of which have taken it into areas far from its core e-commerce business. But for once, this bidding for Allegro looks like a relatively smart move that will complement its own C2C business, where it operates the highly successful Taobao online shopping mall.

The competition with eBay is somewhat symbolic, because Alibaba and the US online auctions leader actually fought a much more intense battle about a decade ago for dominance of China’s own C2C e-commerce market. Alibaba won that war, and eBay has largely retreated from China since then. But it’s far from clear that eBay will give up so easily in Poland, which is more familiar due to its base in a more western market.

Other bidders for Allegro include private equity firm CVC Capital, and several bidders from the company’s home Polish market could be also be interested, according to the reports. (English article; Chinese article) The service is expected to fetch a price of 2-3 billion euros ($2.2 billion to $3.3 billion), and some are pointing out the asset could be attractive as a gateway to other Eastern European markets.

One other slightly interesting twist to this story is that Allegro is being sold by South Africa’s Naspers, which is also one of the earliest investors and largest stakeholders in Alibaba’s hometown rival Tencent (HKEx: 700). That relationship means that Tencent might be able to get preferred bidding status for Allegro if it wanted to, though clearly it’s not interested in an asset that ‘s too removed from its core social networking (SNS) business. But theoretically Tencent could use its close ties to push Naspers towards a deal with eBay or one of the other bidders, in a move to thwart Alibaba.

Ant Marches Into Taiwan

Next there’s Ant Financial, the fast-growing private sector leader in China’s financial services market that is undergoing rapid changes to let in more private investment.  Alibaba has made some investments in online insurance, but the traditional sector remains one that Ant has largely yet to tap.

That looks set to change, with word that Ant has made an 833 million yuan ($124 million) injection into Cathay’s insurance unit and has received 51 percent of the business in return. (English article; Chinese article) Ant previously held a stake in Cathay’s insurance unit, but the actual amount was never disclosed. Ant is hoping to use its online resources such as big data to help Cathay expand its business, which is largely confined to the relatively small Taiwan market.

The size of the investment hints that this is not a particularly big deal for Ant, though it could represent an important testing ground for developing new insurance products and services that could later be sold elsewhere. Cathay and other Taiwanese insurers, and many of the big global names, once held out big hopes for the China market, where insurance is a relatively novel idea and not very popular. But China’s heavy restrictions on foreign investment and the dominance of local players has largely thwarted the outsiders, with the result that the market is still mostly controlled by domestic companies.

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