Alibaba Group, China’s largest ecommerce company, has proposed to take its Hong Kong-listed unit Alibaba.com private amid a shift in strategy that is set to slow the growth of the website.
Alibaba Group owns 74 per cent of its listed subsidiary and is 40 per cent owned by Yahoo. The company is offering minority shareholders HK$13.50 per share in cash, a 60.4 per cent premium over the stock’s 60-day average closing price.
Shares of Alibaba.com surged more than 40 per cent on Wednesday as they resumed trading in Hong Kong. They had been suspended since February 9 pending an announcement. The group had secured a $3bn loan earlier this week that will help it complete the planned deal.
The proposal comes as long-running negotiations with Yahoo over a deal to buy back part of Yahoo’s stake in Alibaba Group have come unstuck. The company’s plan to take Alibaba.com private is not part of a potential Yahoo deal, but driven by its shift in strategy.
While Alibaba.com, the world’s largest marketplace for trade between businesses, originally relied on attracting members to its site for growth, it has been trying to focus on offering higher-quality services to a smaller number of customers after a fraud scandal shook the company two years ago.
The shift has decelerated the rate of new customers, and Alibaba has warned that this is likely to slow revenue growth and make it more difficult to forecast profitability.
“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,” said Jack Ma, founder and chief executive of Alibaba Group.
Alibaba.com reported a drop in fourth-quarter net profit and a sharp slowdown in the sign-up of new business, which was seen as a signal of the impact of the European crisis on global trade. The company said the results were partly due to the shift in business strategy.
Net income for the three months to December 31 decreased 6 per cent compared with a year earlier to Rmb385.9m ($61m), the first drop in more than two years.
Revenue was up 9 per cent to Rmb1.659bn in the quarter, but deferred revenues and customer advances, an indicator of future business, fell 0.3 per cent to Rmb4.423bn.
Revenues for the full year rose 15.5 per cent compared with 2010 to Rmb6.417bn. Profits attributable to shareholders were up 16.6 per cent to Rmb1.713bn.