February 21, 2012, 8:31 AM EST
By Mark Lee and Wendy Mock
(Updates with company comments in 10th paragraph.)
Feb. 21 (Bloomberg) — 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.
–With assistance from Rishaad Salamat in Hong Kong and Katrina Nicholas in Singapore. Editors: Michael Tighe, Frank Longid, Neil Denslow
To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Wendy Mock in Hong Kong at wmock3@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net