(Bloomberg) — Alibaba Group Holding Ltd. has called off the initial public offering of its Hong Kong-based Cainiao logistics unit, in a surprise move that underscores a new approach to reinvigorating its waning e-commerce empire. Transactions worth more than $1 billion were shelved.
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This is the second time Alibaba has canceled a high-profile debut in one of its major businesses, adding uncertainty to a restructuring that began last year and has reversed course since the sudden departure of former chief executive Daniel Zhang. is increasing further. From an initial plan to split the company into six separate divisions that could be independently financed, the current goal is to consolidate the business while selling off non-core assets, such as shares in social media platform Bilibili Inc. The aim is to promote the mainstay commerce sector. EV manufacturer Xpeng Inc.
A Chinese e-commerce pioneer has called off its much-anticipated debut after the country's economic turmoil and regulatory uncertainty made investors nervous about its Hong Kong IPO. Chairman Joseph Tsai described the market as “significantly depressed” and said it would not have been able to provide Cainiao with the “patient capital” needed to achieve global expansion. Ta. Alibaba, which owns 64% of Cainiao, is currently buying out all remaining shares held by investors and employees for $3.75 billion to absorb the fast-growing company into a broader online retail business. are planning.
Alibaba decides to “limit distractions” from Cainiao's initial public offering and instead reinvest in expanding the business, which has outperformed other divisions in recent quarters thanks to its international footprint did. “Given the difficult IPO market conditions, it has become clear that Cainiao's initial public offering is not consistent with our group strategy now or in the foreseeable future,” Tsai told analysts on Tuesday. “The achievable valuation is also not what we consider to be a strategic valuation for Cainiao at this time.”
Alibaba is the internet company Jack Ma founded 20 years ago and built into China's most valuable company before the pandemic and Beijing's punitive antitrust crackdown sapped its growth. We are still grappling with fundamental questions. Since then, it has lost market share to rivals such as PDD Holdings and ByteDance. The company's December quarter sales rose 5%, less than expected and well below the pace of a year earlier.
“This is a surprising turnaround because a few months ago, Alibaba was singing a different tune about Cainiao's strategic importance,” said Ivy Yang, founder of consultancy Wavelet Strategy and a former Alibaba manager. Told. “Cainiao's decision to cancel its IPO will further erode investor confidence in Alibaba's restructuring efforts, its ability to continue to create shareholder value, and the larger question of whether an IPO is still an option for Alibaba Cloud. Let’s go.”
Bloomberg intelligence statement
Alibaba will acquire the remaining 36.3% stake in the Cainiao subsidiary and synchronize the strategic plans of these three highly integrated businesses to support the growth of e-commerce in China and internationally. At the asking price, Cainiao is valued at a price-to-earnings ratio of 0.71x, which is a 26% discount to the average for logistics companies such as SF Holding, ZTO, JD Logistics, and J&T.
– Katherine Lim and Trini Tan, Analysts
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In response, the company is using the proceeds to fund a $25 billion buyback program and invest in technology from cloud to artificial intelligence. Tsai said on Tuesday that Alibaba would focus on integrating its various businesses and regaining its market dominance, rather than working through an IPO.
When the Chinese internet company delisted its $11 billion cloud unit in 2023, executives insisted it should continue to focus on the business rather than what Tsai called “financial engineering.” But the recent decision to scrap Cainiao's operations may disappoint some investors who were hoping for a piece into one of Alibaba's most international divisions.
Caixing Smart Logistics Network Co., which handles most of the millions of packages generated by Alibaba's e-commerce business every day, was valued at about $10.3 billion by the minority acquisition. This is seen as the driving force behind both Alibaba's China commerce business, as well as its rapidly expanding international division, which consists of Singapore-based Lazada and popular bargain site AliExpress. Cainiao (meaning newcomer or amateur in Chinese) aims to deliver packages within 24 hours in China and within 72 hours in other parts of the world, according to the company's website. The company operates more than 300 international flights in partnership with his more than 3,000 logistics partners.
Alibaba also postponed plans to debut its grocery chain Freshippo last year. China's withdrawal from capital markets comes at a time of increasing uncertainty as the Chinese government grapples with a real estate crisis, loss of foreign investor confidence and the resulting downturn in China's economy. At the same time, domestically oriented companies are struggling to grow sales due to declining consumer confidence.
Cainiao's IPO has been shelved in Hong Kong, even as IPOs in other markets such as the US and Africa are poised to pick up. Last week, technology companies Reddit Inc. and Astera Labs Inc., along with Swiss skin care company Galderma Group AG, went public, sparking a flurry of investor demand and sending their stock prices soaring. However, Alibaba gave no indication Tuesday that it is interested in restarting its listing efforts elsewhere.
Tsai said Alibaba, which now controls a vast portfolio of assets after years of investing frenzy, is now actively trying to sell some of these non-core holdings. The company is looking for ways to reduce the burden on its Intime department store chain and other retail operations, Bloomberg News reported.
Read more: Alibaba says it will consider selling mall chains during latest overhaul
–With assistance from Fionn Lee and Manuel Baigoli.
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