Alibaba Bids to Take E-Commerce Site Private

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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
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