Alibaba Group Offers $2.5 Billion to Privatize Listed Unit

Alibaba Group Offers $2.5 Billion to Privatize Listed Unit

Alibaba Group Holding Ltd., in talks
to buy back a stake owned by Yahoo! Inc., offered as much as
HK$19.6 billion ($2.5 billion) to privatize a listed unit and
gain full control of China’s biggest corporate e-commerce site.
The company bid HK$13.50 a share for the 27 percent of
Alibaba.com Ltd. it doesn’t already own, according to a Hong
Kong Stock Exchange statement today. That’s a 46 percent premium
to the last closing price.
Alibaba Group Chairman Jack Ma may take over the listed
unit and purchase the Yahoo stake as he tries to turn around the
company after a fraud scandal and drop in subscriptions.
Alibaba.com today reported quarterly profit that missed
estimates and predicted that vendor growth would slow.
“The company probably wants to privatize in order to
execute a long-term strategy, instead of facing pressures from
capital markets,” Alicia Hu, who rates Alibaba.com
“underperform” at Daiwa Securities Capital Markets in Hong
Kong, said before the announcement.
Alibaba Group also signed a $3 billion loan with six banks,
according to two people familiar with the matter. Australia &
New Zealand Banking Group Ltd., Credit Suisse Group AG, DBS Bank
Ltd., Deutsche Bank AG, HSBC Holdings Plc, and Mizuho Corporate
Bank Ltd. will provide the funds, the people said, asking not to
be identified because details are private.

Group IPO

Alibaba Group may be reorganizing its assets, including
Alibaba.com, as it prepares its own initial public offering,
said Connie Gu, an analyst at BOCOM International in Beijing.
Alibaba.com may see its growth slow as a weaker global economy
means fewer Chinese exporters pay to use the site to sell their
goods abroad, she said before the announcement.
“Privatizing the Hong Kong-listed unit will help the
Alibaba parent’s plans for the IPO,” Gu said.
Alibaba Group, China’s biggest e-commerce company, “won’t
rule out the possibility” of going public, Ma said in a letter
to employees in June. In 2007, Alibaba.com held a $1.7 billion
offering in Hong Kong, then the biggest IPO for an Internet
company since Google Inc.’s in 2004. The sale price matched
today’s HK$13.50 buyout offer.

‘Depressed’ Price

Alibaba.com’s shares will resume trading tomorrow after
being suspended Feb. 9. The stock closed at HK$9.25 on Feb. 8
and has climbed 15 percent this year after falling 42 percent in
2011.
Alibaba.com’s “depressed” stock price is affecting the
company’s reputation and employee morale, Chief Financial
Officer Maggie Wu said in a conference call. An IPO for the
parent is “several years” away, she said.
Alibaba Group is being advised on the transaction by
Rothschild, Credit Suisse and Deutsche Bank. HSBC is working
with Alibaba.com, and Somerley Ltd. will act as adviser to a
board committee.
Yahoo is the biggest shareholder in closely held Alibaba
Group with a stake of about 40 percent. Alibaba sold the holding
in 2005 for $1 billion and ownership of Yahoo’s Chinese unit.
Tokyo-based Softbank Corp. owns about 30 percent of the Chinese
company.
Yahoo, eclipsed by Google Inc. and Facebook Inc. in online
search and advertising growth, is reviewing proposals to unwind
its Asian investments and focus on turning around the main
Internet business.
The value of Yahoo’s Asian assets is about $11.5 billion,
according to Sameet Sinha, an analyst at B. Riley & Co. in San
Francisco.