Alibaba kicks off plans for HiChina spin-off

PUBLISHED : Tuesday, 27 September, 2011, 12:00am
UPDATED : Tuesday, 27 September, 2011, 12:00am, the world's largest business-to-business e-commerce company, plans to spin off its mainland internet infrastructure services unit, HiChina Group, through a separate listing in the United States.

Hangzhou-based said yesterday that its proposal for an initial public offering was submitted to the Hong Kong stock exchange.

'Details of the offering including its size, structure and price have not yet been finalised,' chief executive Jonathan Lu Zhaoxi said in the securities filing.

Persons familiar with the transaction say's 85 per cent equity stake in HiChina, which it purchased for US$79.06 million in 2009, is now worth about US$500 million.

According to an International Financing Review report in June, the proposed US spin-off of HiChina was expected to yield US$200 million to US$300 million.

Founded in 1996, HiChina provides internet domain name services, web-hosting and website-building operations to small and medium-sized companies on the mainland., which had 68.9 million registered users worldwide as of June 30, added about 550 new employees and more than 200,000 customers when it acquired controlling interest in HiChina.

In a 2009 financial report, the e-commerce giant had already contemplated a separate listing of HiChina before January 1, 2016.

But Lu said the spin-off would reduce the company's stake in HiChina, but that its board proposed to give qualified shareholders with an 'assured entitlement' of Hi-China shares after the planned listing.

'Details of the terms of the assured entitlement have not yet been finalised,' he said. shares were down 8.15 per cent to finish at HK$6.42 yesterday, their lowest close since reaching HK$6.01 in February 2009.

The proposed IPO came after an investor group - led by Russian software firm DST Global, US private equity company Silver Lake and China's Yunfeng Capital - announced last week its US$1.6 billion offer for shares of Alibaba Group.

The tender, which began last Friday, valued the parent company at more than US$32 billion and was expected to close within six weeks.