Alibaba to acquire remaining stake in Cainiao for up to $3.75 billion; shelves IPO plan

In a surprising move, Chinese e-commerce behemoth Alibaba Group Holding has called off its plans for an initial public offering (IPO) of its logistics arm, Cainiao Smart Logistics Network. Instead, the company is opting to acquire the remaining 36% stake in Cainiao that it doesn’t currently own, for a hefty sum of up to $3.75 billion.

This decision marks a significant departure from Alibaba’s previous announcement in September 2023, where it unveiled intentions to spin off Cainiao as a separate entity and list it on the Hong Kong Stock Exchange. The strategic pivot hints at a potential reevaluation of Alibaba’s logistics strategy moving forward, Reuters reported.

In its latest reversal, Alibaba, already holding a majority stake of approximately 64% in Cainiao, expressed its intent to take full ownership of the logistics network.

Alibaba Group Chairman, Joe Tsai, elaborated on the rationale behind the move, stating, “Given the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network, we believe this is an appropriate time to double down.”

Tsai’s remarks during a recent earnings call shed light on the challenges facing Alibaba’s IPO plans, citing market conditions as a determining factor. He emphasized that the current market landscape doesn’t adequately reflect the true value of the company’s ventures, including Cainiao.

Alibaba’s decision to forego the IPO route follows reports of a valuation mismatch with potential investors, according to sources familiar with the matter. The company, however, has not responded to inquiries regarding these valuation discrepancies.

The Hong Kong IPO market witnessed a notable slowdown in 2023, with a stark decline in both the number of listings and capital raised compared to the previous year.

In its official statement, Alibaba disclosed its offer to minority shareholders of Cainiao, proposing to purchase all outstanding shares at $0.62 per share.

This move comes amidst a turbulent period for Alibaba, marked by significant corporate restructuring, leadership changes, and strategic realignments. The company’s decision to consolidate its logistics arm underscores its commitment to fortify its core operations amid ongoing market uncertainties.

Alibaba was founded in April 1999 by Jack Ma. The former English teacher stepped down on his 55th birthday after amassing a $41.8 billion fortune — a trove surpassed in Asia only by India’s Mukesh Ambani, according to the Bloomberg Billionaires Index. The resilient Ma overcame many obstacles and challenges to become one of China’s richest men after he received more than a dozen rejections — including from KFC — before being hired as an English teacher. Ma applied ten times to Harvard Business School (HBS), but he was rejected.