September 22, 2011 5:41 pm

Alibaba in $1.6bn private equity deal

Alibaba Group employees and shareholders are set to be given the opportunity to cash out part of their stock in China’s largest ecommerce group by revenues, through a $1.6bn private equity deal.

DST Global of Russia and California-based Silver Lake are leading a tender offer of almost $1.6bn for just under 5 per cent of Alibaba, valuing the internet group at $32bn, according to people familiar with the deal.

More

On this story

IN Technology

Also participating in the transaction are Yunfeng Capital, which is made up of several Chinese entrepreneurs including Alibaba’s chairman and founder Jack Ma, and in a lesser capacity Temasek, the Singapore investment fund.

The deal will effectively push back the prospects for an initial public offering of Alibaba. One person close to the company stressed that this “absolutely signals that there is no IPO” on the cards for Alibaba.

The transaction is a mixed blessing for Yahoo, which now holds a 40.5 per cent share of Alibaba, with the delayed opportunity for an exit tempered by the radical increase in its stake’s value.

As potential bidders circle Yahoo in the wake of Carol Bartz’s firing as chief executive this month, its stake in one of China’s leading internet groups is seen as one of its most prized assets, along with Yahoo Japan, which is controlled by Softbank.

Relations between Alibaba and Yahoo have often been strained, as illustrated by the recent dispute over the spin-off of Alipay, a payment subsidiary. Mr Ma has tried before to buy back Yahoo’s stake but failed to reach an agreement with the major shareholder.

People close to Yahoo say that the company was notified of the DST-led investment before it occurred and is “delighted” with the new $14bn valuation of its stake, which compares with Yahoo’s total market capitalisation in the US of below $18bn.

Yahoo’s shares rose less than 1 per cent to $14.05 in mid-morning trading after news of the Alibaba deal first emerged on AllThingsD, a tech news website.

Alibaba Group’s key businesses include Alibaba.com, the Hong Kong-listed company which operates the world’s largest online marketplace for trade between businesses, Taobao, its consumer-to-consumer marketplace, and Taobao Mall, its business-to-consumer online retail platform.

DST Global, the Facebook and Spotify investor which is led by Yuri Milner, is also an investor in 360buy, a rival to TMall. It emerged this month that 360buy is planning on a $4bn IPO, in spite of some investors’ scepticism about new Chinese internet listings.

DST’s Chinese interests also include a partnership with Tencent, another internet rival to Alibaba, which invested in $300m in DST in April last year. As a matter of policy, DST does not pursue board representation at its holdings to avoid conflicts of interest.

None of the companies involved in the Alibaba tender offer have commented on the proposal.

Additional reporting by Richard Waters in San Francisco

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in