Alibaba Cleared to Privatize Unit After Shareholders Vote

Alibaba Group Holding Ltd. won approval to take a Hong Kong-traded unit private, simplifying its structure as it prepares to repurchase a $7.1 billion stake from Yahoo! Inc. (YHOO) before an eventual initial public offering.

More than 95 percent of votes cast by Alibaba.com Ltd. (1688) shareholders at a ballot in Hong Kong today supported the $2.5 billion buyout offer from the parent, Company Secretary Elsa Wong said. That was more than the 75 percent required to approve the transaction.

Alibaba Group, China’s biggest e-commerce company, said in February it will offer as much as HK$19.6 billion ($2.5 billion) for shares it didn’t own in Alibaba.com, after profit at the unit declined. The closely held Chinese parent company this week agreed to repurchase stock in itself from Yahoo in a deal that billionaire Chairman Jack Ma said may facilitate an initial public offering in the future.

“After the privatization, Alibaba.com’s business will probably be integrated with some of the parent’s other operations,” said Dundas Deng, an analyst at Guotai Junan Securities in Shenzhen. The reorganization will help Alibaba Group’s plans for an IPO, he said.

Premium Offer

Earlier today, Alibaba.com shares were suspended from trading. The shares were unchanged at HK$13.42 in Hong Kong trading yesterday. The HK$13.50 a share buyout bid by the parent was 46 percent higher than Alibaba.com’s price when the stock was suspended Feb. 9 pending the offer announcement.

Alibaba Group controls 73 percent of the shares of Alibaba.com, its e-commerce division that is focused on business owners. The Hangzhou, China-based parent also operates online shopping sites including Taobao and Tmall for consumers.

The Hong Kong-traded shares fell 42 percent last year, as the company said it was changing its focus from adding customers to improving service for users. First-quarter profit fell 25 percent, as fewer website subscriptions were sold to exporters, the unit reported last month.

Ma, a former English teacher owns about 7.4 percent of Alibaba Group, according to a Hong Kong stock exchange filing last month, making his stake worth $2.6 billion.

Alibaba has been trying to buy back the stake from Yahoo for more than a year and stepped up efforts in September because of improving prospects for growth and expansion beyond China. While the deal reduces Yahoo’s presence in China, the world’s largest Internet market, it may aid turnaround efforts as the portal competes with Google Inc. (GOOG) and Facebook Inc. for users and advertising dollars.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Enlarge image

Alibaba Group Cleared to Take Unit Private After Hong Kong

Nelson Ching/Bloomberg

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou.

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou. Photographer: Nelson Ching/Bloomberg

2:17

May 25 (Bloomberg) -- Alibaba Group Holding Ltd., China’s biggest e-commerce company, was cleared to take its Hong Kong-listed unit private after minority shareholders at the subsidiary approved a $2.5 billion buyout offer from the parent. Bloomberg's Paul Allen reports on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)