Alibaba Group Holding Ltd. is making its largest overseas investment with a $1 billion deal for control of Lazada Group SA, taking the Chinese e-commerce giant to Southeast Asia and closer to a goal of shedding its home-market reliance.

China’s largest online emporium will pay $500 million for new shares in the closely held company and will purchase an equal amount from existing investors, Alibaba said. Lazada is No. 159 in the Internet Retailer 2016 Asia 500 with an estimated $116.96 billion in 2015 web sales. Investors selling include Germany’s Rocket Internet SE, an e-commerce investment and technology company; British supermarket chain Tesco Plc, No. 3 in the Internet Retailer 2015 Europe 500; and Investment AB Kinnevik.

Alibaba is buying its way into a region on the cusp of an online shopping boom, as fast-growing mobile and Internet usage propels consumer spending. Billionaire Alibaba Chairman Jack Ma has set a goal of getting at least half the company’s revenue from overseas, with the Lazada deal adding sales of clothing and electronics in six Southeast Asian markets.

While Alibaba has come to dominate e-commerce in its home market, it remains dependent on China for the vast majority of its business. The deal seems to represent a departure for Alibaba, which has mainly chosen to grow organically on its home turf, said Saemin Ahn, managing partner at Rakuten Ventures, which manages a $285 million fund and invests in the U.S. and Asia.

“It has huge cash sitting on its balance sheet so it can do this kind of investment. It’s also seeking future growth drivers,” said Marie Sun, an analyst at Morningstar Investment Service. “It needs to find some other place for future growth.”

Biggest overseas deal

While the deal is Alibaba’s biggest deal abroad to date, the e-commerce giant is no stranger to mega-acquisitions. It agreed to pay about $5 billion to take full control of Chinese video service Youku Tudou Inc. in 2015.

The agreement values Lazada at $1.5 billion, Rocket said in a separate statement. It’s selling a 9.1% stake in Lazada and keeping an 8.8% slice. Alibaba’s deal values its entire stake in the company at about 15 times its total invested capital of 18 million euros ($21 million), the German technology company incubator said.

Buying its way in

Founded in 2012 by Rocket, Lazada operates in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Indonesia, where it competes with Tokopedia and MatahariMall, is Southeast Asia’s largest economy with 256 million people.

Alibaba will be wading into a market where no single player yet dominates. While Southeast Asia’s growing affluence is expected to fuel growth in online shopping, many countries in the region still lack the transport and payments infrastructure so crucial to the widespread adoption of e-commerce.

“Overseas expansion requires a lot of investment in logistics, it would take Alibaba much longer to build the business from the ground up,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong, China. “What Alibaba could do is integrate the businesses and introduce more existing merchants to Lazada to export their products overseas.”

The deal also includes options to buy out certain Lazada shareholders in a 12- to 18-month period after the deal closes, it said. Credit Suisse Group AG advised Alibaba and Goldman Sachs Group Inc. was financial adviser to Lazada.

Overseas expansion

Alibaba, which got more than 86% of its revenue from China in the December quarter, has made previous attempts to expand overseas through direct investments.

It bought San Mateo, Calif.-based 11 Main Inc., only to sell the niche e-commerce site after a few years to rival online marketplace OpenSky when it failed to generate the synergy it was looking for. In exchange, Alibaba said at the time it would hold a “significant” stake in the combined entity.

Back home, Alibaba is pushing its own AliExpress site to buyers in emerging markets such as Russia and Brazil. Fueled by Russian shoppers looking for better deals online, AliExpress, which ships goods directly from Chinese sellers to foreign markets, became the biggest shopping site in the country in 2014, according to researcher TNS.

“With the investment in Lazada, Alibaba gains access to a platform with a large and growing consumer base outside China, a proven management team and a solid foundation,” Alibaba president Michael Evans said in Tuesday’s statement.

(Source: Bloomberg)