China's TikTok has agreed to spend $840 million to buy most of Indonesian tech conglomerate GoTo's (GOTO.JK) e-commerce unit - a move that appears to allow it to restart its online shopping business in Southeast Asia's largest economy.
It also said it will invest further in the business, Tokopedia, which is Indonesia's biggest e-commerce platform, for a total outlay of $1.5 billion.
TikTok had been forced to close its relatively new e-commerce service, TikTok Shop, in Indonesia after the country banned online shopping on social media platforms in September, citing the need to protect smaller merchants and users' data.
The new partnership will commence with a pilot period carried out in close consultation with and supervision by relevant regulators, the companies said in a joint statement.
"We are creating an Indonesian e-commerce champion, combining Tokopedia's strong local presence with TikTok's mass market reach and technological prowess," GoTo CEO Patrick Walujo said in a statement.
"GoTo now sits on a much stronger foundation and we expect this partnership to bring many benefits not just for e-commerce, but for our on-demand services and fintech businesses as well," he said.
GoTo's businesses include ride-hailing, delivery and financial services.
Under the deal, TikTok, which is owned by China's ByteDance, will buy 75.01% of Tokopedia and inject TikTok Shop's Indonesia business into the enlarged Tokopedia entity.
Officials at Indonesia's trade ministry did not respond to requests for comment.
Many of Indonesia's more than 270 million people are active social media users and TikTok has been looking to translate its 125 million user base there into a significant source of e-commerce revenue.
TikTok Shop is currently available in only a few countries including the United States, Britain and Singapore, according to its website.
The deal will be concluded by the first quarter of 2024 and Tokopedia will receive a $1 billion promissory note from TikTok that can be used to fund working capital needs, the companies said.
Tokopedia competes with Shopee owned by Singapore-headquartered Sea (SE.N) and Lazada owned by Chinese e-commerce giant Alibaba (9988.HK).
It saw half-year gross revenue climb 14% to 4.5 trillion rupiah ($288 million) in August while its underlying loss narrowed sharply to 752 billion rupiah from 3.7 trillion rupiah a year ago.
Shares in GoTo, however, tumbled 13% on Monday - their biggest percentage decline in six months - as some investors took profits after the stock had rallied on expectations of a deal with TikTok.
Indonesia's e-commerce industry is set to expand to be worth about $160 billion by 2030 from $62 billion this year, according to a report by Google, Singapore state investor Temasek Holdings and consultancy Bain & Co.
($1 = 15,605.0000 rupiah)
