JAKARTA: TikTok will take a controlling stake in an e-commerce unit of Indonesia's biggest tech firm, PT GoTo Gojek Tokopedia, a partnership that will see the video app invest $1.5 billion over long term, the companies said on Monday.
The deal comes after Indonesia in October banned online shopping on social media platforms to protect smaller merchants and users' data, forcing TikTok to close its e-commerce service TikTok Shop.
Under the deal, TikTok will buy 75.01% of GoTo's PT Tokopedia, Indonesia's biggest e-commerce platform, for $840 million and inject TikTok Shop's Indonesia business into the enlarged Tokopedia entity.
"The strategic partnership will commence with a pilot period carried out in close consultation with and supervision by the relevant regulators," the two firms said in a joint statement.
Many of Indonesia's more than 270 million people are active social media users.
TikTok, owned by China's ByteDance, has 124 million users in the country and has been looking to translate the large user base into a major e-commerce revenue source.
The transactions 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, they said.
"TikTok has committed to invest over $1.5 billion in the enlarged entity over time, to provide future funding required by the business, without additional dilution to GoTo," the statement said.
Shares in GoTo, whose business also includes ride-hailing, delivery and financial services, tumbled 8.3% after the announcement, as some investors took profits from the share's recent rally on expectations of a deal with TikTok.
Tokopedia competes with Sea's Shopee and Chinese e-commerce giant Alibaba's Lazada in Indonesia's e-commerce market.
The industry is expected to expand to 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. - Reuters