CIC eyes US$2b injection into Alibaba Group

PUBLISHED : Monday, 16 July, 2012, 12:00am
UPDATED : Monday, 16 July, 2012, 12:00am

China Investment Corp (CIC), the mainland's US$300 billion sovereign wealth fund, is considering an investment worth at least US$2 billion in Alibaba Group.

The e-commerce giant is seeking capital to fund a share buy-back deal with US internet company Yahoo.

An international investment bank hired by Alibaba submitted a proposal to Beijing-headquartered CIC several weeks ago asking it to provide financial support to the Hangzhou-based company founded by mainland entrepreneur Jack Ma Yun.

People familiar with the situation told the South China Morning Post CIC is likely to buy Alibaba shares and bonds with a combined value of more than US$2 billion. CIC may also help bring in other institutional investors for similar stock-and-bond investments in Alibaba. No agreement has been reached yet.

Alibaba was not available for comment.

In May, Alibaba Group, the parent company of, which was delisted from the Hong Kong market last month, agreed to purchase in stages Yahoo's 40 per cent stake in the group.

Alibaba agreed to initially buy half that shareholding for about US$7.1 billion, made up of at least US$6.3 billion in cash and up to US$800 million in new Alibaba preferred shares.

'Jack Ma and his management team do not have that much money to complete the share buy-back deal with Yahoo, so they have to turn to capital-rich investors like CIC for financial support,' one of the people said.

Ma is chairman and chief executive of the group.

Also, 'there is a need for them to diversify the shareholder structure of Alibaba Group, rather than to hold all the stock to be bought back from Yahoo on their own', said the person, who declined to be identified because the negotiations are private.

To complete its share buy-back deal with Yahoo, Alibaba is also in talks with international and Chinese banks, including Beijing-based China Development Bank, to raise a multibillion-US-dollar loan facility.

The group's shareholders include Yahoo, Japan's Softbank, Singapore's sovereign wealth fund Temasek, Russian venture capital firm DST Global - which is also a shareholder of Nasdaq-listed Facebook - and US private equity firm Silver Lake.

Alibaba is widely expected by investors and analysts to list the entire group in a mega initial public offering of shares, but not until 2013 at the earliest.

The share buy-back deal that Alibaba struck with Yahoo valued Alibaba Group at about US$35 billion.

Besides operating the business-to-business e-commerce service provider, the group also runs the mainland's top online shopping platforms - business-to-consumer site TMall and consumer-to-consumer site Taobao Marketplace - which are widely considered by analysts as Alibaba Group's crown jewels.

Alibaba Group also owns Alipay, a major third-party online payment services provider. A high-profile dispute erupted between Alibaba and Yahoo in 2011 over the disposal and ownership of Alipay.

Some analysts said the government considers the online payment service to be related to China's national security and doesn't want an American company like Yahoo to share control of Alipay.