Alibaba to China Life Join Unicom's $11.7 Billion Stake Sale

  • Baidu, Tencent also among investors in Unicom share sale
  • Suning, Didi Chuxing, China Life to participate in sale

China is continuing to overhaul its bloated state-owned enterprise sector with a share sale at its second largest mobile carrier. Tech leaders Tencent and Alibaba are among those buying the 35% stake in China Unicom. Bloomberg's Stephen Engle and Tom Mackenzie report on 'Bloomberg Markets: Asia.' (Source: Bloomberg)

Companies from Alibaba Group Holding Ltd. to China Life Insurance Co. will participate in a 78 billion yuan ($11.7 billion) share sale by China’s second-largest wireless carrier as part of a government push to draw private capital into its state-owned enterprises.

According to the plan, investors including Tencent Holdings Ltd. and Baidu Inc. will purchase about 10.9 billion shares, or 35 percent, of Shanghai-listed China United Network Communications Ltd. for 6.83 yuan apiece, the state-run company said in a presentation in Hong Kong on Wednesday. Employees will also get to buy about 850 million shares at 3.79 yuan a share, according to the presentation.

Unicom Group was among six SOEs picked by the nation’s economic planner last year for a pilot program in mixed-ownership -- China’s preferred term for private capital’s investments into state firms. It’s part of the government’s broader push to overhaul its SOEs, whose total revenue almost reached $7 trillion last year.

Read more: Gadfly column on the Unicom sale

Hong Kong-listed China Unicom (Hong Kong) Ltd.’s market value has jumped by almost a third this year to more than $36 billion before the stock was suspended from trading on Wednesday. China United shares had risen 80 percent since October in Shanghai before they were suspended from trading in Shanghai in April, pending the announcement. The investors will be buying China United’s stock at 8.6 percent below its latest closing price.

Both companies are units of unlisted China United Network Communications Group Co. -- also known as Unicom Group.

During the past few months, Unicom has signed cooperation agreements with Baidu, Alibaba and Tencent, moves that have generated speculation that the Internet companies would get involved in the government mixed-ownership plan.

Under the latest plan, Inc., Didi Chuxing, Suning Commerce Group Co. and CRRC Corp. will also be among Unicom’s strategic investors.

Read more: breakdown of Unicom’s biggest strategic investors

Unicom Group isn’t alone in taking part in China’s experiment with privatization. In September, China’s National Development and Reform Commission also picked China Southern Power Grid Co., Harbin Electric Corp., China Nuclear Engineering Group Corp., China Eastern Air Holding Co. and China State Shipbuilding Corp. to take part in the pilot program. The idea of infusing private capital is meant to help bring in expertise needed to make state firms more efficient.

Watch Next: Alibaba and Tencent Place Big Bets to Justify Valuations

In June, China Eastern agreed to sell 45 percent of its cargo-and-logistics unit to four non-state companies. The transaction would inject about 2.26 billion yuan of private capital.

— With assistance by Jing Yang De Morel, Prudence Ho, Dave McCombs, and Hannah Dormido

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