Alibaba to buy Cainiao stake for up to $3.75 billion as it drops IPO plan

By Casey Hall and Rishav Chatterjee

(Reuters) -Alibaba Group said on Tuesday it was offering to buy the 36% of Cainiao it does not already own for up to $3.75 billion, abandoning plans for an initial public offering (IPO) of the logistics business in Hong Kong.

In the Chinese e-commerce giant's latest reversal of its restructuring plan, Alibaba, which holds a stake of around 64% in Cainiao, said it was offering to acquire the remaining stock.

"Given the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network, we believe this is an appropriate time to double down," said Alibaba Group Chairman Joe Tsai, who later said on a call with analysts that regulatory issues played no part in the decision to pull Cainiao's IPO.

U.S.-listed shares in Alibaba rose 0.7% in pre-market trading following the announcement.

Tsai said in a recent earnings call all Alibaba's planned IPOs, including Cainiao's, "were subject to market conditions".

"The overall environment for doing capital market transactions in order to unlock value for shareholders is just not there in this part of the world," he said on Tuesday's call. "It doesn't make sense for us to grind into these capital market deals."

The Hong Kong IPO market saw a slowdown in activity in 2023, with 73 company listings raising HK$46.3 billion ($5.92 billion), down 56% from 2022.

The company had faced a mismatch in valuation expectations with potential investors, three sources familiar with the matter said.

Alibaba did not immediately reply to a request for comment on any valuation mismatch but Tsai said Tuesday its offer to minority shareholders valued Cainiao at $10.3 billion.

In a statement, Alibaba said it is offering minority shareholders of Cainiao an opportunity to sell all the outstanding shares for $0.62 per share. It aims to complete the buyback by June or July.

Alibaba has had a tumultuous year since announcing the biggest shake-up in its 25-year history by splitting into six units. It has installed a new CEO, announced and then abandoned listing its Cloud division and refocused on its core businesses.

Those core businesses - e-commerce and cloud - are now led by new Group CEO Eddie Wu. Although Alibaba's domestic e-commerce platforms Tmall and Taobao are still China's largest, they have lost market share in recent years to competitors including PDD Holdings' Pinduoduo.

"We want to win in e-commerce by regaining market share and driving growth," Tsai said, further integration with Cainiao is central to that strategy, he added.

Cainiao first filed the IPO paperwork to the Hong Kong Stock Exchange in September. Tuesday marked the last day of a six month window before which it was required to update its listing status. No timeline had ever been publicly disclosed.

($1 = 7.8231 Hong Kong dollars)

(Reporting by Rishav Chatterjee in Bengaluru and Casey Hall in Shanghai; Additional reporting by Kane Wu and Julie Zhu; Editing by Tasim Zahid, Alexander Smith, Ros Russell and Louise Heavens)