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Yahoo to acquire a 10 percent stake in Alibaba.com

Oct. 10 2007

According to various news reports, Yahoo is considering acquiring a 10 percent stake in Alibaba.com by subscribing to US$100 million worth of stock in Alibaba.com's new IPO offering.

Some industry observers say this contrasts with a term sheet for the deal seen by Dow Jones Newswires that said Yahoo would subscribe to 10 percent of Alibaba B2B firm's IPO, which is slated to raise up to US$1 billion.

In light of all this, Yahoo will probably subscribe to more than 10 percent of the IPO if it is worth less than US$1 billion.

Yahoo already owns a 39 percent stake in Alibaba Group, the parent of Alibaba.com. However, it doesn't have a direct holding in Alibaba's B2B unit.

According to the Dow Jones Newswires' term sheet, Alibaba Group is to offer 858.9 million shares, or 17 percent of Alibaba.com's enlarged share capital in the IPO.

Dow Jones says the share offering is to begin October 15 and listing on the Hong Kong stock exchange is expected for November 6.

Analysts who attended a pre-marketing briefing cited the IPO underwriters as saying some of the offering's proceeds would be invested in Alibaba Group's other businesses, such as consumer-to-consumer (C2C) unit Taobao.com.

Some analysts say that by doing this, Alibaba.com runs the risk of helping out its affiliates at the expense of shareholder value, since all affiliates are currently losing money.

Analysts also stated that only 26 1/2 percent of the shares on the IPO will be new stock not traded privately before the offering, which means the bulk of the funds to be raised won't even be directed into expanding Alibaba.com.

"The company doesn't need a billion dollars for its business expansion and future mergers and acquisitions. But having a big IPO is a landmark event for the company and will create larger liquidity in the market," said an observer that asked to remain anonymous.

Based in Hangzhou, Alibaba.com uses the Web to help match manufacturers in China and elsewhere with potential buyers of their products.


Source: MarketWatch News

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