Cash-rich Alibaba set to continue investment spree outside China

E-commerce powerhouse is likely to morph into a global conglomerate with online and offline operations through acquisitions outside China

PUBLISHED : Friday, 19 September, 2014, 10:25am
UPDATED : Saturday, 20 September, 2014, 2:56am

With a massive war chest raised from its initial public offering and an ambition like no other Chinese company before it, Alibaba Group Holding looks set to morph into a bigger global conglomerate over the next few years, with a mix of businesses online and in the bricks-and-mortar world.

It is a broad strategy cultivated by Jack Ma Yun, Alibaba's lead founder and executive chairman, during a busy period of dealmaking in which the Hangzhou-based e-commerce powerhouse reshaped its operations and business interests through a series of acquisitions and strategic alliances.

That started at around the time Ma stepped down as chief executive last year and continued after Alibaba, the world's largest e-commerce service provider and now the largest listed internet company in Asia, confirmed its much-speculated flotation in the New York Stock Exchange.

Anything is fair game for Alibaba even if the specific targets are unclear, according to Forrester Research.

Alibaba's recent deals included investments, worth tens of billions of dollars, in Chinese department store chain Intime Retail, movie production studio ChinaVision Media Group, national mail service Singapore Post, United States-based mobile messaging firm Tango, online video provider Youku Tudou, mobile game developer Kabam, logistics firm Qingdao Goodaymart and a professional sports team, Guangzhou Evergrande Football Club.

"I don't expect Alibaba to stop its aggressive investment into new areas," said Vanessa Zeng, a senior analyst at Forrester. She pointed out that the company was driven by its mission "to do business anywhere".

Certainly, Alibaba will have deeper pockets after this week to reach that goal. The company had earlier estimated net proceeds from its listing to hit US$8.13 billion at US$67 a share. But that will be surpassed in a record-smashing stock market debut that could be valued at US$25 billion, after announcing a final offering price of US$68 per share.

In its regulatory filing, Alibaba said it intended to use the net proceeds outside China. Ma reassured investors early this week when he said the company planned to speed up expansion in the United States and Europe.

Forrester said in a report that Alibaba's overseas operation would focus on e-commerce investments to launch new platforms that would drive sales; logistics partnerships to help move products faster and farther at a lower cost; and mobile-related investments to gather more customer data.

Future acquisition targets could include "real estate, to bridge the gap between online and offline transactions, or possibly an alternative payment provider to help drive cross-border sales", it said.

Zach Nelson, the chief executive at online business software provider NetSuite, said Alibaba's investment strategy differed from that of its peers in the US.

"While US technology companies don't shy away from acquisitions, such investments tend to be in adjacent markets rather than a conglomeration of loosely coupled businesses," Nelson said, adding that opportunities abounded for NetSuite to partner with a strong e-commerce player like Alibaba in Asia.