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Alibaba shares rise on privatisation plans

The logo of online shopping portal Alibaba.com is seen near its office in Hong Kong on February 22, 2012. (AFP/AARON TAM)

HONG KONG: The share price of Chinese online shopping portal Alibaba.com soared in Hong Kong intra-day trade on Wednesday after its parent company said it plans to take the firm private for $2.3 billion.

Alibaba.com shares rose 42.27 percent to HK$13.16 in strong volume after parent Alibaba Group announced its offer of HK$13.50 per share. It was the stock's first day of trade since it was suspended on February 9.

The offer marks the price at which the unit was listed in 2007, the group said in a statement to the Hong Kong Stock Exchange late Tuesday.

"Taking Alibaba.com 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," group chairman Jack Ma said.

"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 posted a net profit of 1.71 billion yuan ($271.5 million) in 2011, up 16.6 percent over the previous year, but with weakness in the fourth quarter.

The firm said its fourth-quarter net profit fell 6.0 percent from a year earlier, citing cautiousness due to a weak global economic environment.

"The global economy was sluggish in 2011 due to lackluster economic conditions in the major developed markets," it said in a statement.

"Cautious sentiment is restraining consumption in developed economies, which is negatively impacting emerging economies and developing nations. China is unlikely to prove immune to the global slowdown."

Hangzhou-based Alibaba is reportedly planning to borrow $3 billion to buy back the stake Yahoo! owns in the company, as the struggling US Internet firm overhauls its Asia holdings.

Ma has a longstanding offer to buy all or part of Yahoo!

Shares in Alibaba were suspended at the board's request earlier this month due to media speculation about its Yahoo! buy-back and privatization plans.

Its share price had dropped 44 percent in the 12 months leading up to the suspension, and has not traded above the offer price since May last year.

Tanrich Securities investment manager Jackson Wong said that given Alibaba's earnings prospects and recent stock market performance, investors would be brave to reject the buyout bid.

"I'd advise shareholders to take the offer," he told Dow Jones Newswires in Hong Kong.

"You never know if some shareholders will be irrational, but overall I think the chance of the deal going through is high."

Looking ahead, Alibaba.com foreshadowed a "more balanced, multi-revenue stream model" as the strategy shifted away from membership growth and tilted towards improved quality.

This will "take time and require continuous investment", and could "adversely affect our membership growth, financial performance and limit earnings visibility in the near term", the company said.

 

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