Alibaba Bids to Take E-Commerce Site Private

By Beecher Tuttle February 22, 2012

Shares of Alibaba.com skyrocketed on Wednesday after news broke that its parent company plans to take the e-commerce site private.

Alibaba Group Holding Ltd. said that it will look to buy the minority stake in the website for a whopping $2.3 billion, according to the Associated Press (AP). Alibaba currently owns 73 percent of Alibaba.com.

The offer of $13.50 Hong Kong dollars per share represents a 46 percent premium on the stock's previous listing price of HK$9.25. Trading of Alibaba.com had been suspended since Feb. 9 at the request of company, which is undergoing a shift in business strategy that is expected to result in slower short-term revenue growth and limited earnings, Bloomberg reported.

The site – which pairs manufacturers, wholesalers and trading companies with buyers – said that it is no longer adding paying customers at the same rates and has begun refocusing on improving the user experience. With the projected short- to medium-term impact on financial results, Alibaba Group felt it appropriate to take the e-commerce site private.

"Taking Alibaba.cm 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," Jack Ma, founder, chair and CEO of Alibaba Group and Board chair of Alibaba.com, noted in a statement explaining the move. "With this offer, we provide our shareholders a chance to realize their investment now at an attractive cash premium rather than waiting indefinitely during this period of transition."

Alibaba.com's chief financial officer, Maggie Wu, said that the website's "depressed" market value was negatively affecting the Alibaba name and employee morale, according to Bloomberg. Shares plummeted 42 percent last year as fewer paying customers signed up for the service.

Buyers quickly snapped up Alibaba.com shares on Wednesday, sending the stock price near the buyout target of HK$13.50. Although most analysts expect the deal to go through, an independent board committee will evaluate the proposal and offer recommendations to shareholders. The buyout requires 75 percent independent shareholder approval to go through, according to Bloomberg.

The move could help Alibaba in its buyout negotiations with Yahoo, which owns around a 40 percent stake in the company. Alibaba has been trying to buy back its stake from Yahoo for months but has had trouble inking a deal.

"By taking the unit private, it will make it more flexible for the parent to reorganize its assets, and this will be helpful to the discussions with Yahoo," Dundas Deng, an analyst at Guotai Junan Securities, told Bloomberg.




Edited by Chris Freeburn

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

Bloomberg BETA: Models Are Key to Machine Intelligence

By: Paula Bernier    4/19/2018

James Cham, partner at seed fund Bloomberg BETA, was at Cisco Collaboration Summit today talking about the importance of models to the future of machi…

Read More

Get Smart About Influencer Attribution in a Blockchain World

By: Maurice Nagle    4/16/2018

The retail value chain is in for a blockchain-enabled overhaul, with smarter relationships, delivering enhanced transparency across an environment of …

Read More

Facebook Flip-Flopping on GDPR

By: Maurice Nagle    4/12/2018

With GDPR on the horizon, Zuckerberg in Congress testifying and Facebook users questioning loyalty, change is coming. What that change will look like,…

Read More

The Next Phase of Flash Storage and the Mid-Sized Business

By: Joanna Fanuko    4/11/2018

Organizations amass profuse amounts of data these days, ranging from website traffic metrics to online customer surveys. Collectively, AI, IoT and eve…

Read More

Satellite Imaging - Petabytes of Developer, Business Opportunities

By: Doug Mohney    4/11/2018

Hollywood has programmed society into believing satellite imaging as a magic, all-seeing tool, but the real trick is in analysis. Numerous firms are f…

Read More