Alibaba to buy Cainiao stake for up to $3.75 billion as it drops IPO plan

SHANGHAI: Alibaba Group (9988.HK), opens new tab said on Tuesday it was offering to buy the 36% of Cainiao it does not already own for up to $3.75 billion, abandoning plans for an initial public offering (IPO) of the logistics business in Hong Kong.

In the Chinese e-commerce giant's latest reversal of its restructuring plan, Alibaba, which holds a stake of around 64% in Cainiao, said it was offering to acquire the remaining stock.

"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.

U.S.-listed shares in Alibaba rose 0.7% in pre-market trading following the announcement.

Tsai said in a recent earnings call all Alibaba's planned IPOs, including Cainiao's, "were subject to market conditions".

"Market conditions currently are just not in a state where we believe we can really truly reflect the true intrinsic value of these businesses," he said at the time.

The company had faced a mismatch in valuation expectations with potential investors, three sources familiar with the matter said. Alibaba did not immediately reply to a request for comment on any valuation mismatch.

The Hong Kong IPO market saw a slowdown in activity in 2023, with 73 company listings raising HK$46.3 billion ($5.92 billion), down 56% from 2022.

In a statement, Alibaba said on Tuesday that it is offering minority shareholders of Cainiao an opportunity to sell all the outstanding shares for $0.62 per share.

Alibaba has had a tumultuous year since announcing the biggest shake-up in its 25-year history by splitting into six units. It has installed a new CEO, announced and then abandoned listing its Cloud division and refocused on its core businesses.

Those core businesses - e-commerce and cloud - are now led by new Group CEO Eddie Wu. Although Alibaba's domestic e-commerce platforms Tmall and Taobao are still China's largest, they have lost market share in recent years to competitors including PDD Holdings' (PDD.O), opens new tab Pinduoduo.

"The management reorganisation resulted in more nimble and efficient decision-making, and we have seen a major positive impact on our business. We are confident that the effects of this reorganisation will be reflected in Alibaba's operating and financial metrics in the future," Tsai said.

Cainiao first filed the IPO paperwork to the Hong Kong Stock Exchange in September. Tuesday marked the last day of a six month window before which it was required to update its listing status. No timeline had ever been publicly disclosed.

Alibaba also said it would hold a conference call at 9:30 p.m. Hong Kong time to discuss the Cainiao announcement.