Alibaba Sharpens Focus in Yahoo Buy-Out, Taobao Mall 阿里巴巴回购雅虎所持股权有望

By newsdoug on October 11, 2011

Alibaba regains focus with new buyback plan It wouldn’t be a proper week if I didn’t write at least one commentary about Alibaba Group, which has been in the headlines nearly non-stop following the firing of Carol Bartz as the controversial CEO of Yahoo (Nasdaq: YHOO), which owns 40 percent of Alibaba. After initial reports said Alibaba founder Jack Ma was interested in both buying and running all of Yahoo (previous post), the latest reports indicate Ma may have found little interest from investors in that plan and instead is narrowing his focus to simply buying back the 40 percent stake in his company owned by Yahoo. (English article; Chinese article) According to the reports, Ma is talking to Singapore sovereign wealth fund Temasek about funding a buy-out of the 40 percent stake, in a move which looks much betterthan Ma’s previous hopes of taking over and running Yahoo, which would have stood a big chance of failure. Bringing in Temasek as its controlling stakeholder makes lots of sense, as this kind of investor is purely interested in earning money rather than a strategic pair-up, which is far more suited to Ma’s style as an extremely self-confident business owner who likes to call all the shots and doesn’t like to listen to others. Combined with separate media reports that say Yahoo co-founder Jerry Yang is trying to engineer a privatization of his company, I could easily see Yahoo first being taken private, and then Ma’s Temasek-backed group buying back the 40 percent Alibaba stake from that newly privatized company. Separately, domestic and foreign media are reporting that Alibaba’s main B2C platform, Taobao Mall, is making a broad set of new moves to prepare itself for an IPO, possibly as soon as next year. (English article; Chinese article) The moves are too detailed to describe fully here, but the bottom line seems to be that merchants that sell on Taobao will see their fees rise dramatically, while Taobao is also taking strong early steps to prevent the kind of fraud on its site that undermined its sister company, B2B marketplace operator Alibaba.com (HKEx: 1688), earlier this year. Both moves look smart in my view, as the higher fees will weed out many of the smaller sellers that were the most likely to engage in fraud while significantly boosting revenue from the biggest merchants, while the anti-fraud measures will avoid future controversy like the one dogging Alibaba.com.

Bottom line: Alibaba Group is finally regaining some much needed focus by targeting a buyback of the 40 percent of the company owned by Yahoo, and by sharpening operations at its Taobao Mall.

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