Jack Ma

Sale to Yahoo gave Alibaba a future

Despite the disputes, chairman says linking with US giant allowed firm to get stronger

PUBLISHED : Saturday, 13 July, 2013, 12:00am
UPDATED : Saturday, 13 July, 2013, 9:12am

Disputes between US web giant Yahoo and mainland e-commerce powerhouse Alibaba Group have made many headlines in the past few years.

So, in hindsight, would Alibaba chairman Jack Ma Yun have sold a 40 per cent stake in Alibaba to Yahoo in the first place?

The answer, he says, is yes.

"The co-operation with Yahoo was very important in the growth of Alibaba," Ma said. "If today I had an opportunity to rethink it, I would make the same decision."

He stressed that it was just an ordinary deal, albeit an important one.

"People like to legendise it, but in fact the whole thing was simple," Ma said.

It was as simple as the two firms accidentally meeting and deciding to team up. But when things reached a certain stage, both sides felt it was better to go their separate ways.

Ma said that, looking back, the deal was a good one. In 2005 Yahoo exchanged its Chinese arm, Yahoo China, together with US$1 billion in cash for 40 per cent of Alibaba's stock.

"With that US$1 billion, Alibaba got a healthier future," Ma said. "Not that we were short of money, but … we cashed out many small venture capitalists."

He said the benefit was that Alibaba was not forced to go public and it strengthened its customer-to-customer site, Taobao, to compete with US online marketplace eBay.

Alibaba bought back some of the Yahoo stake for US$7.6 billion last year. Yahoo currently owns 24 per cent of Alibaba.

According to an agreement, when Alibaba launches its initial public offering, it has the right to buy back half of that amount from Yahoo at the IPO price.

Liu Xingliang, chairman of Hongmai Software, a Beijing-based internet firm, said Alibaba must buy back the Yahoo stake as soon as possible because the price will keep rising.

"Alibaba is doing very well and it will only become more expensive if they don't buy out the stake now," Liu said.

The IPO is expected to be announced in the fourth quarter of this year, at the earliest, analysts say. It could raise US$10 billion, one analyst said.

When the firm's business-to-business platform, went public in late 2007, its share price jumped to more than 100 times earnings. The stock rose but then fell, and never regained the attention of investors. It finally delisted from the Hong Kong exchange in August last year.

Zhi Li, chief analyst at Enfodesk, said Alibaba's core competence was the maturity of its e-commerce ecosystem that involved manufacturers, distributors and service providers. The mainland's online shopping market was worth 1.3 trillion yuan (HK$1.63 trillion) last year, accounting for 6.3 per cent of total consumer goods retail sales.