Alibaba abandons Cainiao IPO plans, proposes acquisition

Alibaba Group on Tuesday announced its decision to abandon plans for an initial public offering (IPO) of Cainiao, its logistics business, in Hong Kong. Instead, the Chinese e-commerce giant showed its intention to acquire the remaining 36 per cent stake in Cainiao for up to $3.75 billion.

The move marks a reversal in Alibaba's restructuring strategy, with Chairman Joe Tsai stressing that the strategic importance of Cainiao to Alibaba's long-term vision of building a global logistics network. The decision comes amid a challenging IPO market environment, where Alibaba faced valuation mismatch issues with potential investors.

Alibaba's US-listed shares saw 0.7 per cent increase in pre-market trading following the announcement. Tsai highlighted that current market conditions do not reflect the true intrinsic value of Alibaba's businesses, including Cainiao.

In a bid to provide an exit opportunity for minority shareholders of Cainiao, Alibaba offered to purchase all outstanding shares for $0.62 per share. This move comes as part of Alibaba's broader restructuring efforts, which have seen the installation of a new CEO and a refocus on core businesses amid increased competition.

While Alibaba's domestic e-commerce platforms remain China's largest, the company has faced challenges in maintaining market share against competitors like Pinduoduo. Despite the tumultuous year, Alibaba expressed confidence in the positive impact of its management reorganization on future operating and financial metrics.

Cainiao had initially filed for an IPO in September, but Tuesday marked the expiration of the six-month window for updating its listing status, with no publicly disclosed timeline for the IPO. Alibaba announced a conference call to discuss the Cainiao announcement later in the day.

(With Reuters inputs)