Alibaba Offers To Take Listed Unit Private For $2.5B
Chinese e-commerce firm Alibaba Group has offered to take its Hong Kong-listed unit Alibaba.com private at a cost of around HK$19.6 billion ($2.5 billion), a move it said was not related to a possible deal with Yahoo Inc on buying back Yahoo's stake in the Chinese Internet giant.
Alibaba Group, founded by Jack Ma, is offering investors HK$13.50 ($1.74) in cash per share to take Alibaba.com private, the same as its initial public offering price in 2007, the two said in a statement to the Hong Kong Stock Exchange late on Tuesday.
That implies a premium of more than 60 percent over its 60-day average closing price, Alibaba said. Alibaba.com's shares closed at HK$9.25 on February 8 before being suspended pending an announcement - a 12-week closing high, but down 30 percent from last July. The stock will resume trading on Wednesday.
"Taking Alibaba.com private will allow our company to make long-term decisions that are in the best interest of our customers and that are also free from the pressures that come from having a publicly listed company," Ma, who is chairman of Alibaba Group and board chair of Alibaba.com, said.
Not Related To Yahoo Deal
Alibaba.com is 73 percent-owned by Alibaba Group, which in turn is 40 percent-owned by Yahoo, which bought its stake for about $1 billion in 2005.
The remaining 27 percent of Alibaba.com is held by public investors including Morgan Stanley, Vanguard Group and Capital International, according to Thomson Reuters data.
Ma has been trying to buy back a large stake in Alibaba held by Yahoo, but talks on a complex asset swap have been deadlocked.
Sources told Reuters last week that the talks over a so-called cash-rich asset swap broke down over how best to value Taobao, Alibaba's fast-growing online retail business.
The plan to take Alibaba.com private had nothing to do with a possible Yahoo deal, Alibaba said in the statement.
Alibaba Group will finance the Alibaba.com deal through external funding and internal cash resources, it said, adding the offer price would not be increased.
Alibaba has signed a $3 billion loan giving it the money it needs to buy out the unit, sources told Thomson Reuters publication Basis Point on Monday.
Weak Q4 Results
News of the go-private deal came shortly after Alibaba.com posted a first profit decline in more than two years in the fourth quarter of 2011, as a weak global economy hit the number of paying members for its services.
October-December net profit fell 6 percent to 385.95 million yuan ($61.3 million) from 410.4 million yuan a year earlier, roughly in line with forecasts from two analysts polled by Thomson Reuters I/B/E/S. It was the first quarterly profit fall since the 2009 third quarter.
The company, which operates an e-commerce website linking Chinese businesses to overseas buyers, warned its financial performance and membership growth could be dented further as it shifts to a value-added-services model from a subscription-based service.
"The company is undergoing a business transition, and I think things will start to probably recover in 2013," said Dick Wei, a Hong Kong-based analyst for J.P. Morgan.
Alibaba.com's paying members fell 2.8 percent in the fourth quarter to 765,363 as international buyers have become less active due to the euro zone debt crisis and a weak recovery in the United States. The e-commerce firm's exposure to international markets makes its turnover sensitive to the performance of major economies.
Alibaba.com said the changing focus of the business, which will be more on improving the platform than on increasing subscriber numbers, would impact the company's results in the medium term, and was the main reason behind the privatization.
"With this offer, we provide our shareholders a chance to realize their investment now at an attractive cash premium rather than waiting indefinitely during this period of transition," Ma said in the statement.