Alibaba, SoftBank eye new joint investments

Alibaba Executive Vice-Chairman Joseph Tsai says the companies will continue to collaborate, jointly invest in new ventures

PUBLISHED : Thursday, 02 June, 2016, 10:42am
UPDATED : Friday, 03 June, 2016, 7:02am

Alibaba Group plans to pursue promising new investments alongside its largest investor, SoftBank Group Corp, after the Japanese conglomerate sold US$8.9 billion worth of shares that it owned in the Chinese e-commerce giant.

“We’re two different companies so ... strategically, we’re quite complementary rather than competitive,” Alibaba executive vice-chairman Joseph Tsai said in a conference call with analysts Thursday morning.

“We see a lot of ways to work together and jointly invest in some interesting opportunities around the world.”

Last month, Alibaba extended its cloud-computing service business in Japan through a new joint venture with the telecommunications subsidiary of SoftBank.

Tsai said Alibaba has also taken the lead in early-stage projects, like the time it helped SoftBank invest in the Chinese ride-hailing service that eventually became Didi Chuxing.

His comments followed SoftBank’s announcement on the same day that its newly formed Mandatory Exchangeable Trust successfully made an aggregate private placement of US$5.5 billion in securities exchangeable into Alibaba shares in three years to unnamed “qualified institutional buyers”.

That transaction, involving 55 million in Trust securities outstanding, is expected to close on June 10.

The Trust also granted the initial purchasers of those securities an option to buy up to an additional US$1.1 billion of its securities.

Shares of New York-listed Alibaba declined 6.48 per cent to close at US$76.69 in US trading on Wednesday, a day after SoftBank revealed its divestment plan. SoftBank had earlier estimated it would sell US$7.9 billion worth of Alibaba shares.

SoftBank president Nikesh Arora said in the same conference call that the proceeds from the Alibaba share sale would help “manage our leverage and balance sheet”, quashing speculation that those could be used to buy assets from beleaguered US internet company Yahoo.

“I can unequivocally say we are not involved in the process that Yahoo is running in any way shape or form,” Arora said, referring to Yahoo’s planned asset sale.

SoftBank said it will hold a 28 per cent shareholding in Alibaba after all its announced divestment transactions are completed. The company had a 32.2 per cent stake in the world’s largest e-commerce services company as of March 31.

Yahoo still controls a 15 per cent shareholding in Alibaba.

Apart from its massive Trust deal, SoftBank agreed to a US$2-billion share buyback by Alibaba.

The Hangzhou-based company said it used cash on hand to purchase 27.03 million shares from SoftBank at US$74 per share.

Members of the Alibaba Partnership, which is composed of executive chairman Jack Ma Yun and the company’s other co-founders, made a collective deal to acquire an additional US$400 million of Alibaba shares from SoftBank at the same price.

GIC Private Limited, a sovereign wealth fund established by the Singapore government, had also agreed to buy US$500 million of Alibaba shares from SoftBank.

In addition to those previously announced transactions, SoftBank said it subsequently entered into a sale of US$500 million Alibaba shares to Aranda Investments, a wholly owned subsidiary of the state-owned investment company Temasek Holdings (Private) Limited in Singapore.

This initiative marked SoftBank’s first sale of Alibaba stock since its initial investment in the Chinese firm in 2000.

Arora said SoftBank initiated talks about its divestment plan with Alibaba some six months ago. “Given that we are a very large shareholder of Alibaba and have access to information ... we have a very specific window in which we can sell anything,” Arora said.

Alibaba owns the South China Morning Post.