Feb. 22 (Bloomberg) — Alibaba.com Ltd., China’s biggest
corporate e-commerce site, jumped the most in more than four
years after its parent company bid as much as HK$19.6 billion
($2.5 billion) to buy out minority shareholders.
Alibaba Group Holding Ltd., run by billionaire Jack Ma,
offered HK$13.50 a share for the 27 percent it doesn’t already
own in Alibaba.com, according to a statement yesterday. Shares
climbed 43 percent, the most since November 2007, to HK$13.20 at
the 4 p.m. close of trading in Hong Kong.
Ma is in separate negotiations with Yahoo! Inc. to buy the
40 percent stake the U.S. company owns in closely held Alibaba
Group. Yahoo would benefit if the proposed privatization helps
boost the performance of the unit, which predicted slowing
growth in adding vendor accounts, according to Elinor Leung, an
analyst at CLSA Ltd. in Hong Kong.
“From Alibaba Group’s perspective, either with a deal with
Yahoo or not, they are still better off with the
privatization,” Leung said. “It gives more flexibility for the
parent company to turn around the business.”
Deal Premium
The offer is 46 percent more than Alibaba.com’s last
closing price before it was suspended Feb. 9. The shares
declined 42 percent last year, and the company said yesterday
that quarterly profit declined after changing its focus from
adding paying members to improving customer service.
Alibaba.com’s “depressed” stock price is affecting the
company’s reputation and employee morale, Maggie Wu, chief
financial officer of the unit, said in a conference call
yesterday.
“Taking Alibaba.com private will allow the company to make
strategic decisions, focus on long-term benefits free from the
pressure of market expectations and earn visibility and share-
price fluctuations associated with being a listed company,” Wu
said.
The planned buyout of Alibaba.com is “unrelated” to the
discussions between Alibaba Group and Yahoo, Wu said. The parent
company won’t raise its offer price for the unit, she said.
Alibaba Group has stepped up efforts to buy back shares
from Yahoo, its biggest shareholder, since Carol Bartz stepped
down as CEO of the Sunnyvale, California-based company in
September. Bartz had opposed a sale.
Yahoo’s Struggles
Yahoo, founded in 1995, has considered selling its Asian
assets after struggling to compete with Google Inc. and Facebook
Inc. for online users and advertising dollars. The U.S. company
acquired its stake in Alibaba, based in Hangzhou, China, in 2005
for $1 billion and ownership of Yahoo’s Chinese unit.
Yahoo declined to comment on Alibaba Group’s offer to buy
out the unit.
Talks over the possible sale of Yahoo’s stake in its Japan
operations and in Alibaba Group reached an impasse, a person
briefed on the matter, who asked not to be identified because
the discussions are private, told Bloomberg News this month.
“By taking the unit private, it will make it more flexible
for the parent to reorganize its assets, and this will be
helpful to the discussions with Yahoo,” said Dundas Deng, an
analyst at Guotai Junan Securities in Shenzhen, China.
Financing
Yahoo has considered a deal with Alibaba Group that would
cut its stake in the Chinese company to about 15 percent, a
person familiar with the matter said in December. A possible
deal may involve a tax-efficient arrangement in which Yahoo
would swap its holding in Alibaba Group for cash and certain
operating assets, the person said.
Alibaba.com may be an asset that could be offered to Yahoo
under the possible transaction between the U.S. company and
Alibaba Group, said Kelvin Ho, an analyst at Yuanta Securities
Co. in Hong Kong.
“If the deal between Yahoo and the Alibaba parent goes
through, Alibaba.com can enter into the equation,” Ho said.
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.
Alibaba Group may seek more banks to underwrite a $3
billion loan signed yesterday with six lenders, according to two
people familiar with the matter. The loan will be split into a
$2 billion short-term facility and a $1 billion three-year term
facility, one of the people said.
Baidu, Tencent
Australia New Zealand Banking Group Ltd., Credit
Suisse Group AG, DBS Bank Ltd., Deutsche Bank AG, HSBC Holdings
Plc, and Mizuho Corporate Bank Ltd. are providing financing to
Alibaba, according to a company filing to the Hong Kong Stock
Exchange yesterday.
John Spelich, a Hong Kong-based spokesman for Alibaba Group,
declined to comment on the financing.
The parent 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.
The premium offered by Alibaba Group is 55 percent above
Alibaba.com’s average price in the 20 days through Feb. 8.
That compares with the 29 percent average in 56 completed
or pending Internet deals costing more than $1 billion that were
announced in the past decade, according to data compiled by
Bloomberg.
The buyout of Alibaba.com was valued at 33 times the unit’s
earnings, according to the company’s filing. New York-listed
Baidu Inc., China’s most valuable Internet company, trades at
43.34 times earnings, and Hong Kong-listed Tencent Holdings Ltd.,
China’s biggest online games operator, at 30.47 times, according
to data compiled by Bloomberg.
The proposal to buy out minority shareholders in
Alibaba.com requires approval of 75 percent of the votes cast by
unit shareholders at a meeting to approve the deal, according to
the Hong Kong exchange filing. Alibaba Group, which controls 73
percent of the unit’s shares, isn’t eligible to vote. The
meeting date isn’t set.
The buyout offer is “highly likely” to be approved, Jin
Yoon, an analyst at Nomura Holdings Inc. in Hong Kong, wrote in
a report today.
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 yesterday’s HK$13.50
buyout offer.
To contact the editor responsible for this story:
Michael Tighe at
mtighe4@bloomberg.net