China's Baidu takes control of Brazil's Peixe Urbano in expansion push

SAO PAULO (Reuters) - China's Baidu Inc (BIDU.O), the world's No. 2 Internet search engine, bought control of Brazilian rival Peixe Urbano for an undisclosed sum, the latest step in a push to expand in Latin America's largest economy that began more than two years ago.

Under terms of the transaction, which were announced in a statement on Thursday, Baidu will let Peixe Urbano's management team, led by co-founder and chief executive officer Julio Vasconcellos, operate autonomously within Baidu's corporate structure. Both firms declined to give the size of Baidu's stake in Peixe Urbano.

The Chinese company started operations in Brazil last November although in July 2012 it introduced a Portuguese-language version of its Hao123 link-list website.

Baidu CEO Robin Li, who accompanied Chinese President Xi Jinping on a visit to Brazil in July, pledged during the visit that the company would spend 120 million reais ($50 million) in Brazil over the next three years.

The purchase of Peixe Urbano's controlling stake will help Baidu grow in a country where the e-commerce market is expected to grow an average 18 percent annually by 2016, according to several consulting firms including E-bit and A.T. Kearney.

"International expansion is a priority for Baidu and, as part of that strategy, Brazil stands out as a key market where more than 50 million people access our services every day," Johnson Hu, Baidu's head of global business, was quoted as saying in the statement.

Yet several issues linger for online retailers in Brazil, which are grappling with intense competition, eroding profitability and upfront investment in technology needed to increase scale and improve customer service.

With local interest rates at their highest in almost three years, household debt peaking and persistently high inflation eating up disposable income, many leading Brazilian online retailers may lose money this year, Goldman Sachs Group Inc said this year.

Baidu is actively investing in rival technology firms to upgrade its services and grow market share in segments such as e-commerce and mobile social network companies. The company expects that the entirety of its product and service portfolio will be used by half the world's population by 2019.

($1 = 2.3777 Brazilian reais)

(Reporting by Guillermo Parra-Bernal; Editing by Chizu Nomiyama)