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JAJARKA (Reuters) -- China's TikTok will invest $1.500 billion to become a majority shareholder in an e-commerce unit of Indonesia's GoJek Tokopedia, as it seeks to restart its online shopping business suspended by regulators in Southeast Asia's largest economy.
Indonesia banned online shopping on social media platforms in October to protect small merchants and user data, forcing TikTok to shut down its e-commerce service TikTok Shop.
This marketplace was one of the few where the short-video app operator launched TikTok Shop earlier this year to tap into a large user base and challenge fast-growing online sellers like Shein and PDD Holdings' Temu, whose viral marketing on TikTok helped its rapid growth.
Shares of GoTo, whose business includes private travel, delivery and financial services, fell 8.3% after the announcement as some investors benefited from the stock's recent rally on expectations of a TikTok deal.
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"We need to see what kind of market disruption will occur after this partnership," said analyst Maximilianus Nico Demus of Pilarmas Investindo Sekuritas.
Under the deal, TikTok will buy 75.01% of Tokopedia from GoTo, Indonesia's largest e-commerce platform, for $840 million and inject TikTok Shop's Indonesian business into Tokopedia's expanded entity.
"The strategic partnership will begin with a pilot period carried out in close consultation and supervision by the relevant regulators," the two companies said in a statement on Monday.
Many of Indonesia's more than 270 million people are active users of social media.
TikTok, owned by China's ByteDance, has 124 million users in the Southeast Asian country and has been looking to turn that large user base into a major source of e-commerce revenue.
The transaction will close in 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.
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"TikTok has committed to invest more than $1.500 billion in the expanded entity over time, to provide the future funding required by the business, with no additional dilution for GoTo," they said.
Tokopedia competes in Indonesia's e-commerce market with Singapore-based Sea's Shopee and Chinese e-commerce giant Alibaba's (BABA) Lazada.
Indonesia's e-commerce industry will expand to about $160 billion by 000 from $2030 billion this year, according to a report by Google, Singaporean state investor Temasek Holdings and consultancy Bain & Co.