It takes two to tango, however for Alibaba and Yahoo it never worked out. It was always a troubled relationship. Alibaba’s Founder and CEO Jack Ma is now trying a new tack by putting together a consortium to buy Yahoo. Alibaba Group, Silver Lake Partners and Russia’s DST Global are considering a bid for Yahoo. A well-structured deal would provide Alibaba’s CEO Jack Ma and his co-owners with an undiluted control over the Alibaba Group.
Recently Silver Lake, DST Global, together with Tamasek and Yungfeng e-Commerce Funds participated in a US$1.6bn tender offer for privately held employee and shareholder stock of the Alibaba Group. The investment is said to be just under 5% which would value Alibaba at US$32bn. In contrast Yahoo’s market value is approximately US18bn, but according to the FT’s recent Lex commentary Yahoo’s value could be as high as US$23bn. In the meantime Microsoft is considering a bid for Yahoo. Perhaps in the end shareholders will finally reap their reward.
Alibaba’s interest in taking over Yahoo has alarmed US privacy advocates. They believe the deal would put data on US citizens under Chinese control fearing that Yahoo would sanction the surveillance of millions of Americans. What possible secrets could be gained by China to monitor their e-mail traffic? Lots of data about US Citizens is already in the public domain via social media and one does not need Yahoo to read it. Since we are living in the age of ‘WikiLeaks’ a misuse of Yahoo’s data would soon be detected causing customers to shun Yahoo, thus diminishing its value for Alibaba and co-investors.
However there is another aspect to be considered. China’s regulators are equally concerned about foreign ownership of Chinese information businesses, which compile databases on businesses and individuals. China’s regulators are contemplating to introducing a law which will prohibit the export of data on Chinese businesses and individuals to other countries. Perhaps the US could follow suit and prohibit any export of credit data on businesses and individuals to China. Such an undertaking would however be contrary to current international conventions concerning cross border transfer of data and would be detrimental to transparency in cross border business and investment transactions.
Source: Financial Times – BIIA Commentary