China Investment Corp, hedge funds and a group of private equity firms are all looking to invest in Alibaba Group as the Chinese ecommerce company seeks to raise funds to help it buy back part of its stake from Yahoo.
The financing is meant to help raise $7.1bn to repurchase half the 40 per cent stake in Alibaba that Yahoo controls, valuing Alibaba at $30bn-$40bn. Alibaba is using a combination of debt, equity and equity-linked financing to pay off the $6.3bn cash portion of the Yahoo deal. The other $800m will be paid in preferred stock.
The financing being planned involves both a tranche of convertible preferred stock and common stock with the expectation that investors will double their money when Alibaba eventually lists, according to people familiar with the matter.
“They have no shortage of capital,” says one major Asian private equity investor. “Everyone is lobbying to come in.”
CIC, China’s sovereign wealth fund, which has been considering taking a stake in Alibaba for at least a year, is expected to take up a big chunk of the common shares, which are far more attractive than the preferred, potential investors say.
The private equity firms likely to invest include Boyu Capital, the local investment firm established by Mary Ma, a former top executive at Lenovo and then at TPG, and Louis Cheng, a former top executive at Ping An, the Chinese insurer. Among the principals of the fund is Jiang Zhicheng, a grandson of former Chinese president Jiang Zemin.
Blackstone, Temasek of Singapore, Yuri Milner’s DST Global and Silverlake Partners, the US technology-focused investment firm that took a combined $1.6bn stake in Alibaba last September, are also expected to take part.
Meanwhile, shareholders Alibaba.com, the Hong Kong-listed unit of Alibaba Group, on Friday accepted a $2.5bn privatisation offer by the parent company, which clears the way for the restructuring of the business.
Alibaba Group announced in February that it wanted to buy the 27 per cent of the unit that it did not own because the business-to-business marketplace had stopped focusing on customer growth in favour of offering high-quality services to a more selective pool of users. This change in strategy would slow its growth during the transition, the company said.
Alibaba.com, listed since 2007, had to replace its top management last year after it was discovered that sales staff helped suppliers defraud their customers. The group had said in February that it had lined up enough in bank loans to help finance the buyback.
On Friday, 83.8 per cent of Alibaba.com’s shareholders accepted the HK$13.50 a share buyback offer, which was the same as the IPO price four years ago. The stock was trading at about HK$9 before the privatisation plan was announced.