Alibaba.com Shareholders Vote In Favor Of Alibaba Group Privatization
05/25/2012| 01:25am US/Eastern
--Alibaba.com shareholders vote in favor of privatization
--Alibaba.com shares now suspended from trade
(Adds vote percentage in paragraph 9, shareholder comment in paragraph 10)
By Paul Mozur and Juro Osawa
Minority shareholders of Alibaba.com Ltd. (1688.HK) on Friday voted in favor of a proposal by its parent Alibaba Group Holding Ltd. to take the Hong Kong-listed online trading unit private, as the Chinese Internet giant tries to gain more control over its diverse business units ahead of the group's expected initial public offering.
According to the proposal, Alibaba Group will pay HK$13.50 a share for the 27% stake it doesn't already own in Alibaba.com. Earlier, Alibaba Group said taking the struggling e-commerce portal private would free it from "the pressures" of having a listed company.
The company suspended its shares from trading Friday. Its shares closed at HK$13.42 each on Thursday.
Alibaba.com said in early 2011 it would focus on improving the quality of its platforms to attract buyers instead of looking to aggressively increase the number of paying members using the site, a move that it warned would affect profitability. In 2011, revenue growth dropped to 15.5% compared with 43.4% growth in 2010.
In addition to operating Alibaba.com, which links small manufacturers with buyers around the world, the group operates China's largest shopping websites, consumer-bartering site Taobao Marketplace and retail site Taobao Mall.
Though Alibaba Chief Executive Jack Ma said the privatization was primarily geared at taking pressures off Alibaba.com during its restructuring, analysts view the move as a means to consolidate control over Alibaba Group with the aim of eventually taking all of Alibaba Group's operations public as part of a single listing.
Earlier this week, Alibaba Group said it would pay a minimum of $7.1 billion in cash and stock for up to half of Yahoo Inc.'s roughly 40% stake in Alibaba Group. The buyback has been viewed as yet another move by Alibaba Group to gain more autonomy.
The agreement with Yahoo incentivizes Alibaba Group to list before December 2015, as that would allow it to purchase back another 10% of Yahoo's stake in Alibaba Group.
At Friday's shareholders' meeting, about 84% of the voters approved the privatization proposal. Those in favor of the proposal also represented about 95% of the value of the minority stake, more than the 75% required by Hong Kong regulation. Before the voting began, a few shareholders raised questions about the HK$13.50 price per share and also criticized the management for the company's sluggish performance over the past several years.
"The price is too low," said Liu Nanchang, a 67-year old retired engineer from Shenzhen, who voted against the proposal. Liu bought the shares last year at around HK$8 apiece.
Alibaba.com shares were mostly below HK$9 early this year, but the stock surged in late February on Alibaba Group's plans to privatize Alibaba.com. The share price has since been stable above HK$13.
Though Alibaba Group has said it has no timetable to list, any public offering would likely be a large one. Potential valuations of Alibaba Group based on equity sales to finance the Yahoo buyback could be between $35 billion and $50 billion.
The eventual listing of the group will help it avoid controversy as it integrates Alibaba.com's database of manufacturers and trading companies with Taobao, which it has said it plans to do over the next two years.
Taobao is not a part of the Hong Kong-listed Alibaba.com, and integrating the databases from the two sites might have raised complaints from shareholders.
Ma was embroiled in a controversy last year after he transferred ownership of online-payment company Alipay to himself without official approval from Alibaba's board. Ma said he made the move to comply with a Chinese government order, and the company eventually reached an agreement to essentially repay Alibaba Group.
The integration of Alibaba.com and Taobao, is part of an array of strategic decisions designed to tie all of Alibaba's services and products together in an "ecosystem," so merchants, logistics companies and consumers can conduct business online easily.
-By Paul Mozur and Juro Osawa, Dow Jones Newswires; 86 10 8400 7702; firstname.lastname@example.org