Alibaba Group announced on Tuesday its decision to abandon plans for an initial public offering (IPO) of its logistics business, Cainiao, in Hong Kong. Instead, the Chinese e-commerce giant revealed its intention to acquire the remaining 36% stake in Cainiao that it does not already own, with an offer of up to $3.75 billion.
Alibaba, which currently holds approximately 64% of Cainiao, emphasized the strategic importance of the logistics arm and the long-term potential it sees in expanding a global logistics network. Alibaba Group Chairman Joe Tsai clarified that regulatory issues did not influence the decision to withdraw Cainiao’s IPO.
Following the announcement, U.S.-listed shares in Alibaba experienced a 0.7% increase in pre-market trading. Tsai highlighted that all of Alibaba’s planned IPOs, including Cainiao’s, were contingent on market conditions, which have not been favorable for capital market transactions in the region.
The Hong Kong IPO market witnessed a slowdown in 2023, with significantly fewer listings compared to the previous year. Alibaba cited a valuation mismatch with potential investors as one of the challenges faced in the IPO process.
Alibaba’s offer to minority shareholders of Cainiao values the logistics business at $10.3 billion, with the proposal to purchase outstanding shares at $0.62 per share. The company aims to complete the buyback by June or July.
Amidst a tumultuous year marked by organizational restructuring and leadership changes, Alibaba has reaffirmed its focus on core businesses such as e-commerce and cloud services. With new Group CEO Eddie Wu at the helm, Alibaba aims to regain market share and drive growth, with Cainiao’s further integration playing a central role in this strategy.
Cainiao initially filed for its IPO with the Hong Kong Stock Exchange in September. The announcement on Tuesday marked the conclusion of a six-month window during which Cainiao was required to update its listing status, although no public timeline had been disclosed previously.