FUND RAISING: Alibaba, Uber, Didi Kuaidi In Mega Fundings

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Bottom line: Major new funding raising by Uber, its Chinese equivalent, and Alibaba’s logistics arm reflect continued interest in such leading Internet firms by major global Investors, though funding will slow sharply for smaller, less known players.

Three new Internet deals raise $5 bln

It seems my earlier forecast was incorrect that major fund-raising for Chinese Internet companies could be cooling due to waning investor sentiment during the recent market volatility. The latest headlines include 3 major new deal close to completion, worth a collective $5 billion. The largest has Didi Kuaidi, the homegrown Chinese equivalent of private car services giant Uber, on the cusp of new a funding deal worth $3 billion. The second has the actual Uber also near a deal to raise $1.2 billion for its Chinese business, as it prepares to spin off the unit into a separate company.

Meantime, the smallest of the deals has e-commerce leader Alibaba ‘s(NYSE: BABA) Cainiao logistics unit also on the verge of a deal to provide hundreds of millions of yuan for a small logistics company. In this case the move appears aimed at helping Cainiao to build up its stable of partners providing logistics service. The addition of such outsiders would also help to validate Alibaba’s 2-year-old program to plow 100 billion yuan into its logistics capabilities.

My earlier forecast of a rapid slowdown in major Internet funding was based on recent market volatility that has cooled sentiment towards such deals, especially among shorter-term, highly speculative investors. But that said, it’s worth noting that all 3 of these new funding recipients are huge companies with major backers, and most of the investors have a longer-term view and aren’t simply looking to make some quick profits.

Let’s begin with the largest of the deals, which has Didi Kuaidi reportedly near the $3 billion funding that will value the company at a cool $16.5 billion. (Chinese article; English article) This particular deal has been under discussions for the last 2 months, and the final amount raised was well above the $2 billion figure mentioned in earlier reports. This latest round will bring in names like Japan’s Softbank and Ping An (HKEx: 2318; Shanghai: 601318), China’s second largest insurance company, alongside earlier backers including Internet giants Alibaba and Tencent (HKEx: 700).

Didi Kuaidi will reportedly have a cash pot of more than $4 billion after this latest funding, though there’s no mention of why such a young company needs so much money. But I do suspect it will use the funds for a globalization drive that already includes Southeast Asia, and is likely to include a costly and very competitive trip to the US, where Uber is already a dominant force. (previous post)

Uber Seeks Chinese Backers

Next there’s Uber, whose own deal comes amid growing talk that it will spin off its China unit into a separate company due to the size and complexity of the Chinese market. I wrote about this funding last week when reports disclosed that local financial giant Citic Group would be one of the new investors. Uber chief Travis Kalanick revealed the size of the newest funding, which comes after he previously said his company plans to spend $1 billion this year alone to build up its China business. No other investors were given in this latest report, but the list is likely to include many local companies that could help Uber to navigate the tricky China market.

Finally there’s Alibaba, whose latest move will see Cainiao and several other logistics companies pour “hundreds of millions” of yuan, mostly likely the equivalent of around $300-$500 million, into a third round of funding for a logistics company called kxtx.cn. (Chinese article) The list of other investors includes Deppon Logistics and GLP, 2 major local logistics companies.

This particular investment is part of Alibaba’s bigger announcement 2 years ago that it would invest 100 billion yuan, or more than $16 billion, into building up its logistics capabilities over the next few years. (previous post) Such a move is critical for Alibaba’s future success, since it operates online shopping malls that are home to thousands of smaller merchants that often lack the resources for things like quick order processing and product delivery. Alibaba made a similar move last year year with a major investment in Singapore’s top package delivery firm (previous post), and we can probably expect to see more similar logistic-oriented tie-ups and other investments in the next few years.

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