Alibaba Group Holding Ltd. bid for the rest of Chinese mapping company AutoNavi Holdings Ltd. as billionaire Jack Ma steps up competition with Baidu Inc. and Tencent Holdings Ltd. to gain mobile Internet users.
The cash offer is worth $21 for each American depositary receipt, valuing AutoNavi at about $1.6 billion, according to a statement yesterday. AutoNavi, which is 28 percent owned by Alibaba, said the bid will be considered and no decision had been made.
Alibaba, said to be preparing for an initial public offering, is seeking to win more of China’s 618 million Internet users with services for smartphones and tablet computers. Buying AutoNavi would give China’s largest e-commerce company control of the nation’s most-popular mobile mapping service to challenge Baidu Maps and also add tools to compete with Tencent for services such as taxis and restaurant recommendations.
“Alibaba is trying to compete with Tencent for location-based services,” said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. “Buying AutoNavi fully will help better integrate and monetize the business.”
ADRs in AutoNavi surged 24 percent to $20.57 at the close in New York, the biggest gain since the shares were sold to the public in June 2010. The offer is 27 percent higher than the closing price on Feb. 7 closing price.
“There can be no assurance that any definitive offer will be made, that any agreement will be executed or that this or any other transaction will be approved or consummated,” AutoNavi said in a statement.
Beijing-based AutoNavi had approximately 77 million active users of its free mobile map apps as of the end of the third quarter of 2013. Jessica Himmel of Ogilvy Financial, a Beijing-based spokeswoman representing AutoNavi, today referred questions about the deal to company statements, which said AutoNavi intends to form a committee of independent directors to consider the proposal.
The company had more than 31 percent of the Chinese market for mobile map apps at the end of the third quarter, compared with about 27 percent for Baidu and 7.6 percent for Google Inc.’s service, according to an investor presentation.
Alibaba said it’s prepared to “promptly” negotiate and finalize an agreement, and it doesn’t expect a lengthy due diligence process.
“The market for navigation and map applications and services has become increasingly challenging, as several larger, well capitalized Internet players in China have become major competitors,” Alibaba said.
The offer is the latest proposed deal from Alibaba, which has been valued at an average of about $150 billion as it considers moving toward the biggest IPO since Facebook Inc.
In the past year, Alibaba has bought a stake in Sina Corp.’s Weibo, China’s largest Twitter-like service, as well as investments in luxury-sales site 1stdibs.com Inc. and retail website ShopRunner Inc.
Alibaba makes most of its sales from commissions and advertising. Ma, 49, is China’s fourth-richest person with an estimated net worth of $11.5 billion, according to the Bloomberg Billionaires Index.
Goldman Sachs Group Inc. valued Alibaba at $150 billion in a Jan. 29 report, while Macquarie Group Ltd. said the company may be worth as much as $200 billion.
AutoNavi’s digital map database covers approximately 3.6 million kilometers (2.2 million miles) of roads and more than 20 million “points of interest” across China. The company, which also lets users search for apartments, restaurants and cinemas, posted net revenue of $37.7 million in the third quarter, a decrease of 6.4 percent from a year earlier.
Yahoo! Inc., based in Sunnyvale, California, owns a 24 percent stake in Alibaba, which operates platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers. SoftBank Corp., the Japanese wireless carrier controlled by billionaire Masayoshi Son, owned about 37 percent of Alibaba as of July.