Pick me (and only me), Alibaba and told banks

Bitter rivals in mainland e-commerce draw lines for sponsors of their initial public offerings

PUBLISHED : Thursday, 20 March, 2014, 12:00pm
UPDATED : Tuesday, 21 April, 2015, 11:26am

Top investment banks have been forced to choose between two important clients - bitter rivals Alibaba and the mainland's largest e-commerce firms.

Both companies are planning to list in New York.

Global investment banks have been salivating at the chance to win a role in their initial public offerings. However, they had to decide which they wanted to sponsor because none was allowed to sponsor both.

"The message was very clear from both sides - it's either you or me," said a banker, who declined to be named as he was not authorised to speak to the media.

The message was very clear from both sides – it’s either you or me

It has been public knowledge that Alibaba's founder, Jack Ma Yun, and JD's founder, Richard Liu Qiangdong, do not get along.

Liu sometimes publicly criticises Alibaba and Ma's business practices. Alibaba and its executives often hit back.

The two e-commerce firms compete fiercely in a fast-growing industry where Alibaba's targets the same online consumers on the mainland who shop on which is previously known as Jingdong Mall.

Alibaba plans to hire six banks to work on its initial share sale, through which it aims to raise between US$15 billion and US$20 billion.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley will send senior representatives to meet Alibaba managers next week to prepare for the offering.

Alibaba announced on Sunday its plan to list in New York and is expected to make a formal application next month.

If successful, investment banks working on the listing would pocket several hundred million dollars in fees.

JD, which has already filed its US listing documents, has hired Bank of America Merrill Lynch and UBS to handle its offering, which aims to raise about US$1.5 billion.

Some of the banks hesitated before deciding on which offering to sponsor.

Sources said Deutsche Bank was interested in JD's listing but later switched to Alibaba.

UBS also wavered between the two offerings before taking on the JD issue, they said.

"It's not always true that a bigger initial public offering is more important than a smaller one from investment banks' perspective. It's all about what your role is," one of the sources said.

"For example, if you get a big offering but only play a supporting role, you might opt for a leading role in a small offering instead."

Joseph Lee, a lawyer at Cadwalader Wickersham & Taft, said there were no legal restrictions prohibiting an investment bank from handling two public offerings in the same industry at the same time.

However, professional standards required the banks notify their clients and seek legal consent to avoid any potential conflict of interest, Lee said.

Additional reporting by Ray Chan