Alibaba’s Cainiao Withdraws IPO Application and Sells Shares to Alibaba Group
Around this time a year ago, Alibaba initiated a “1+6+N” organizational adjustment and prepared to make some businesses independent and go public. The list of proposed IPOs included Alibaba Cloud, Freshippo (also known as Hema), and Cainiao. Less than six months later, however, Alibaba Cloud returned to the group, Freshippo postponed its IPO, and only Cainiao submitted its IPO application in October, 2023.
But now, not only has Cainiao withdrawn its IPO application, but it also plans to sell all its issued shares to Alibaba Group at a price of up to 3.75 billion USD, corresponding to an estimated value of about 10.3 billion USD, according to Chinese media LatePost.
After the transaction is completed, Alibaba will own approximately 63.7% of Cainiao’s fully diluted equity. In terms of business, Cainiao will shift from pursuing independence back to focusing on strategic synergy with Taobao, Tmall, and Alibaba‘s overseas e-commerce.
At the communication meeting on March 26, Alibaba‘s management said it would use the existing liquidity of the Alibaba Group to acquire Cainiao’s shares, hoping to complete it in June or July this year. It will not have any significant impact on the group’s finances, and it is also hoped that this move will reduce the uncertainty that minority shareholders need to face.
According to the IPO application documents released earlier, Cainiao achieved about 77.8 billion CNY in revenue in the fiscal year ending March 2023, a year-on-year increase of about 16.35%. In the three months ending at the end of September of that year, Cainiao achieved a quarterly income of 22.82 billion CNY, a year-on-year increase of 25%.
In the earnings conference call in February this year, Joseph Tsai, Chairman of Alibaba Group and Chairman of Cainiao Group, said in response to analysts’ questions about Freshippo and Cainiao’s IPO plans, whether to advance related transactions depends on market conditions, and the current market conditions cannot reflect the true intrinsic value of these businesses.
“So in the past few months, Eddie (Wu Yongming) and his team have carefully examined our core business, and the conclusion we have reached is that the synergy between the companies within the group will be the best way to reflect the value of the entire Alibaba Group. We are very excited about the potential to create value through close cooperation between businesses.” Joseph Tsai said last month.
Today, Joseph Tsai further elaborated on the above two points, namely strategic synergy and the capital market environment:
On the strategic front, Cainiao provides uniquely tailored logistics services to Alibaba’s domestic and international e-commerce businesses. In order to provide the most competitive consumer experience, it is crucial that to achieve deep integration between Cainiao’s operations and our e-commerce businesses.
From Alibaba Group’s perspective, the priority is clear, that is, to win in e-commerce by regaining market share and driving growth.
In addition, as Joseph put it, there is an emerging opportunity for Cainiao to make sustained infrastructure investments to expand its global logistics network and become a leading platform to serve customers from around the world. The execution of this expansion plan requires patient capital and a long-term horizon.
At the end of the communication meeting, an analyst asked Joseph Tsai if there were any subsidiaries or assets left to sell, and this is what Joseph Tsai said:
“If we want to restart capital market transactions, or what’s left or not left, let’s not talk about it. That is to say, if we now want to carry out capital market transactions and release value to shareholders, such a large environment no longer exists, at least in Asia, there is no such environment — the market is sluggish and lacks liquidity. So for us, it makes no sense to forcefully push such capital market transactions. Because it is impossible to achieve the goal of realizing value for shareholders. This is our current view.”
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