Jack Ma wants to take back control of Alibaba, the Chinese e-commerce group he founded. An earlier spat over their payment unit Alipay showed Ma wields considerable power at the Chinese e-commerce giant, and has ways to deter other bidders. Ma may get what he wants, but financing it won't be easy. More, after selling at the bottom, he risks paying a peak price.
Yahoo's 43 per cent in Alibaba has become a thorn in Ma's side. Even though he runs the group as chief executive, his stake has been diluted to 7.5 per cent. Relations with ousted Yahoo Chief Executive Carol Bartz were tense after Yahoo tried to put two directors on the Alibaba board. Ma then worsened things by transferring Alipay, the group's online payment unit, to a company he controls, citing regulatory necessity. Removing Yahoo's presence would no doubt rid him of a big headache.
Ma's biggest advantage is nuisance value. Yahoo has an agreement that gives Alibaba's shareholders the option to buy back the stake if it tries to sell to anyone else. Shuffling Alipay out of Yahoo's grasp looked bad for Ma, but it also showed that he can influence what happens at the company. That will limit what other bidders will pay for the stake.
Financing might be a problem. If Yahoo keeps, say, a 15 per cent stake in Alibaba, Ma would still need to pay over $8 billion, at the mooted $30 billion valuation. Alibaba is trying to raise $4 billion debt in a three-year syndicated loan, according to Basis Point, but that is only half what it needs. Foreign lenders are getting more wary of becoming involved with the kind of complex structures Alibaba uses to circumvent rules on foreign investment in Internet companies.
Ma's timing may not be perfect either. Competition is heating up for Taobao, Alibaba's online marketplace and its crown jewel. Largest rival 360buy.com is mulling a New York listing. Taobao has been struggling to charge more for its service, even facing protests by sellers outside its headquarters in Hangzhou. Ma sold the 43 per cent stake to Yahoo for less than it was worth in 2005. He may end up paying more than he should to get it back.
