Alibaba Group (the Offeror) and Alibaba.com are taking Alibaba.com private and have made an offer to minority shareholders of HK$13.50 per share in cash, which implies a premium of 60.4 percent over the 60-day average closing price of Alibaba.com shares, and a premium of 55.3 percent over the 10-day average closing price.
A major factor driving Alibaba Group’s decision to privatize its publicly traded subsidiary, which is engaged in the B2B marketplace business, is to provide minority shareholders an opportunity to realize returns while Alibaba.com implements a shift in its business strategy. Alibaba.com and the Offeror stated in their joint announcement that this shift could result in slower revenue growth and less earnings visibility in the short- to medium-term. Alibaba.com’s business in the early years was driven by a focus on rapidly increasing the number of manufacturers, trading companies and wholesalers that pay a subscription fee to sell products on the company’s marketplaces in order to maximize revenue growth. Last year, the company implemented a major initiative toward improvements in the quality of the buyers’ experience on the company’s online marketplaces. As a result the pace of adding paying customers has been slowed down. In previous disclosures, Alibaba.com outlined this strategic shift, warning investors that despite confidence in the favorable long-term prospects of these initiatives, there would likely be a short- to medium-term impact on financial results.
Source: Alibaba Press Release