Alibaba abandons Cainiao IPO plans, offers $3.75 billion to buy remaining stake

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Alibaba Group, in a surprising move, has decided to shelve the initial public offering (IPO) plans for its logistics arm, Cainiao, and instead is offering to buy the remaining 36% stake it does not already own for up to $3.75 billion. This decision represents a significant shift in strategy for the Chinese e-commerce giant.

Alibaba currently holds a stake of around 64% in Cainiao and views the logistics business as strategically important. Alibaba Group Chairman Joe Tsai emphasized the long-term opportunities in building out a global logistics network, stating, “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.”

The decision to abandon the IPO comes amidst challenging market conditions in Hong Kong, where the IPO market saw a slowdown in activity in 2023. Tsai cited the unfavorable environment for capital market transactions as a reason for pulling Cainiao’s IPO, stating, “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.”

Alibaba’s offer to minority shareholders of Cainiao values the logistics business at $10.3 billion, with an offer price of $0.62 per share. The company aims to complete the buyback by June or July.

This move comes as Alibaba has been undergoing significant restructuring, including splitting into six units and installing a new CEO. The company has also refocused on its core businesses, e-commerce and cloud, under the leadership of new Group CEO Eddie Wu.

Alibaba’s decision to double down on Cainiao and focus on regaining market share in e-commerce reflects its commitment to strengthening its core operations and driving growth. Integration with Cainiao is expected to play a central role in Alibaba’s strategy to achieve this goal.

Cainiao had initially filed for an IPO in Hong Kong in September, and Tuesday marked the last day of a six-month window before which it was required to update its listing status. However, no timeline for the IPO had ever been publicly disclosed, making Alibaba’s decision to buy back the remaining stake a surprising but strategic move.

(Source: Barron’s | Seeking Alpha | Nikkei Asia)

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