New Loan Brings Alibaba Value Into Focus

By newsdoug on December 19, 2011

Loan provides latest clue to Alibaba value New figures coming out of a foreign media report are starting to shed some light on the value Alibaba, China’s biggest e-commerce group, as it moves forward with a deal that would see it lead a group to buy out faded Internet giant Yahoo (Nasdaq: YHOO) and then personally buy back the 40 percent of itself that Yahoo current holds. The interesting element to all this is that based on the latest numbers, Alibaba’s valuation is likely to come in around $20 billion, not bad for a company whose only listed unit, B2B specialist Alibaba.com (HKEx: 1688) is only worth about $5 billion, but also a far cry from the $32 billion that some would like others to believe. According to the latest report, Alibaba is close to assembling a $4 billion loan that it would use to buy back the 40 percent of itself held by Yahoo after the bigger Yahoo buyout, which itself would be valued at around $25 billion. (English article) We already know from public data that Yahoo’s other big Asia asset, its 35 percent stake in Yahoo Japan (Tokyo: 4689), is worth about $6 billion at current market rates. That means $19 billion of the $25 billion purchase price would cover Yahoo itself and the 40 percent of Alibaba that it owns. We also know that Alibaba is raising $4 billion in bank loans to buy out the 40 percent of itself owned by Yahoo, which presumably represents perhaps about half of the financing for the deal. So that would mean Alibaba may pay about $8 billion for the 40 percent stake in the end, valuing itself at about $20 billion and the rest of Yahoo at about $11 billion. I know that may look like a lot of math, but at the end of the day we’re looking at 3 big pieces: A new Yahoo worth about $11 billion, an Alibaba worth about $20 billion and a Yahoo Japan which we already know is worth $18 billion. The Alibaba figure is the most interesting to me, as one of the company’s newest investors previously said the price his company paid for a stake in Alibaba this summer valued the group at $32 billion (previous post) I said that figure looked quite inflated and was indicative of China’s looming Internet bubble, which is already showing signs of bursting. Alibaba certainly realizes all this, which is why it is working hard to quickly close this deal and maintain a respectable valuation in the $20 billion range before the bubble really bursts.

Bottom line: The latest figures on a pending deal to buyout Yahoo show Alibaba is worth about $20 billion, a respectable sum but still well below a figure floated in the market earlier this year.

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