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| File photo taken on Sept. 10, 2011 shows Jack Ma, chairman of Alibaba Group, at Alifest, an enterpreneur summit sponsored by Alibaba, in Hangzhou, capital of east China's Zhejiang Province. Chinese e-commerce giant Alibaba Group has offered to privatize its Hong Kong-listed arm Alibaba.com, Ltd. at a price of 13.5 Hong Kong dollars per share, the companies said in a joint statement released Tuesday night. (Xinhua/Huang Zongzhi) |
BEIJING, Feb. 23 (Xinhua) -- Chinese e-commerce giant Alibaba Group announced this week its plan to make private its Hong Kong-listed arm Alibaba.com for 13.5 Hong Kong dollars per share, fanning widespread market talk of the motivations behind the move.
"Making Alibaba.com private will allow our company to make long-term decisions that are in the best interest of our customers and also free us from the pressures coming from having a publicly listed company," said the group's founder and chairman Jack Ma.
He said the bid offers shareholders a chance to turn shares into cash now instead of waiting indefinitely for the company's transition.
Alibaba's offer, on a par with the price when the business-to-business (B2B) portal went public in late 2007, represents a 60.4-percent premium over the company's latest 60-day average closing price.
The announcement gave a significant lift to the company's shares. Alibaba.com soared 42 percent to 13.2 Hong Kong dollars on Wednesday, its first trading day after a suspension on Feb. 9.
The market response was read by many as a sign that the plan will likely succeed.
"Though shareholder's response is yet to really be seen, the performance on the stock market shows the plan is likely to go smoothly," said Fang Xingdong, founder of blogchina.com and chinalab.com, a web research consultancy.
Uncertainties still exist as under Hong Kong's regulations as the completion of the deal requires approval of at least 75 percent of independent shareholders, but the votes objecting to the deal should be less than 10 percent.
If approved, the Alibaba Group said it will finance the privatization, which is estimated to cost 19 billion Hong Kong dollars, through external debt financing provided by a consortium of banks, as well as internal cash resources.
The Alibaba Group, as well as two of its wholly-owned subsidiaries, own 73.5 percent of Alibaba.com, with the remaining 26.5 percent owned by public investors.
BUSINESS RESTRUCTURING
Alibaba's latest move comes as the unit's B2B model, which targets mid- and small enterprises, faces huge challenges amid rising production and labor costs in the stumbling global economy.
"We have clearly seen that as international and domestic economic climates continue on a downward trend... Alibaba.com's business model faces enormous challenges," Ma said in an email to his staff, adding their restructuring efforts have been hampered by the structural limitations of a listed company.
According to Alibaba's latest report, the group's net profit in the fourth quarter totaled 387 million yuan, down 5.8 percent year-on-year.
Alibaba.com, the B2B portal, has thrived on attracting manufacturers, traders and retailers to buy entries into the platform, but starting last year, the company has shifted its strategy from expanding the number of paying member to fostering a site with better quality and service to buyers, by lifting the threshold to entries.
The policy change has led to a decline in the number of paying vendors. As of Dec. 31, 2011, paying vendors on Alibaba shrank 5.4 percent over a year earlier to 765,363.
But Ma seemed determined to push for the reform and analysts said the delisting will help the group restructure.
"The privatization will help clear hurdles for business reshuffles as the group will feel less capital pressures," said Zhang Yanan, an analyst with Zero2IPO Research Center.
ENTIRE GROUP LISTING
Besides business restructuring motivations, many see the move as Jack Ma's first step to a flotation of the entire empire.
"More capital operations will follow the move, the group will list some of its assets, but possibly after the group buys back the stakes owned by Yahoo!," said Feng Lin, an analyst with China E-commerce Research Center.
Alibaba group tied with Yahoo! in 2005, when the latter turned over the operation of China Yahoo! to Ma and acquired nearly 40 percent of the group's stakes with 1 billion U.S. dollars.
Currently, Alibaba group is 39 percent owned by Yahoo!, 29.3 percent by Softbank and 31.7 percent by Ma and his groups.
In a bid to wrestle more power and control over the group, Ma had tried to buy back the stakes from Yahoo!, but no consensus has been reached so far.
Fang said the privatization was Ma's clever move as he could handle the issue with Yahoo! behind closed doors as a delisted group is free from information disclosures.
"If Alibaba goes public after buying back Yahoo!'s stake, it can still raise huge capital," said Fang.
Zhang offered a different view, saying though the prospect sounds nice, it does not necessary mean that the group will list all its business divisions.
In response to market speculation, Shao Xiaofeng, Chief Finance Officer of Alibaba, said the group does not have a plan to go public.
"Even if the group has a plan for listings, it will be after years," she said.
