Alibaba to acquire Cainiao shares for up to $3.75 billion as it abandons IPO plans

Alibaba to acquire Cainiao shares for up to $3.75 billion as it abandons IPO plans
Alibaba to acquire Cainiao shares for up to $3.75 billion as it abandons IPO plans

Alibaba Group revealed that it will offer to buy Cainiao’s remaining 36% stake for up to $3.75 billion, scrapping plans for the logistics company’s Hong Kong IPO

Alibaba Group (9988.HK) announced on Tuesday that it will offer to buy the 36% of Cainiao that it does not already own for up to $3.75 billion, abandoning plans for the logistics company’s initial public offering (IPO) in Hong Kong.

In the latest reversal of its restructuring plan, Alibaba, which owns approximately 64% of Cainiao, announced a bid to acquire the remaining equity.

“Given the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network, we believe this is an appropriate time to double down,” said Alibaba Group Chairman Joe Tsai, who later stated on a call with analysts that regulatory issues played no part.

Alibaba’s US-listed shares increased 0.7% in pre-market trade following the announcement.

Tsai stated on a recent earnings call that all of Alibaba’s planned IPOs, including Cainiao’s, “were subject to market conditions.”.

“The overall environment for doing capital market transactions in order to unlock value for shareholders is just not there in this part of the world,” he said in a conference call on Tuesday. “It doesn’t make sense for us to grind into these capital market deals.”

The Hong Kong IPO market had a decline in activity in 2023, with 73 business listings raising HK$46.3 billion ($5.92 billion), a 56% decrease from 2022.

According to three people familiar with the subject, the company’s valuation assumptions did not match those of possible investors.

Alibaba did not immediately respond to a request for clarification on any valuation discrepancies, but Tsai said Tuesday that its offer to minority shareholders valued Cainiao at $10.3 billion.

According to an announcement, Alibaba is offering minority owners of Cainiao the opportunity to sell all existing shares for $0.62 per share. It plans to finish the repurchase by June or July.

Alibaba has had a turbulent year since unveiling the most significant restructuring in its 25-year history, dividing into six companies. It has appointed a new CEO, announced and then abandoned the offering of its cloud segment, and refocused on its core activities.

Eddie Wu, the new Group CEO, is now in charge of these main companies, which include e-commerce and cloud. Although Alibaba’s domestic e-commerce platforms, Tmall and Taobao, remain China’s largest, they have lost market share in recent years to competitors such as PDD Holdings (PDD.O.), Pinduoduo.

“We want to win in e-commerce by regaining market share and driving growth,” Tsai stated, emphasizing that further integration with Cainiao is critical to that goal.

Cainiao first submitted the IPO paperwork to the Hong Kong Stock Exchange in September. Tuesday marked the end of a six-month period during which it was required to update its listing status. There had never been a public timeline.

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