Alibaba.com Shareholders Urged to Vote ‘Yes’ as Privatization Plan Advances

Alibaba.com, the B2B e-commerce site that’s the only part of the Alibaba Group to have publicly listed, is a step closer today to going back to being privately-held. An Independent Board Committee (IBC) of Alibaba.com (HKG:1688), as well as an independent financial advisor (Somerley) appointed by the board, have both evaluated the privatization proposal that was put forward last February and decided that it is “fair and reasonable” as a deal for shareholders.

The proposal is that the company will pay HK$13.50 in cash per share, which is a premium of 60.4 percent over the prior 60-day trading average from the February 21st proposition date.

Alibaba has filed a number of documents with the Hong Kong Stock Exchange (HKSE) today. Prime among these is a voting paper for shareholders. There’s also a 180-page “Scheme of Arrangement” paper that outlines the actions needed on the part of shareholders, and the full nature of what is being offered.

In a separate press release from Alibaba, the company described its motivation for the privatization in more straight-forward and succinct terms:

A major factor driving Alibaba Group’s decision to privatize its publicly traded subsidiary, which is engaged in the B2B marketplace business, is to provide minority shareholders with an opportunity to realize their investment in Alibaba.com at a significant premium over the current market price, while Alibaba.com implements a shift in its business strategy.

Both Yahoo (NASDAQ:YHOO) and Softbank (TYO:9984) are major shareholders in the Alibaba Group, and only passing mentions are made to both those parties in the huge “Scheme of Arrangement” document. Referring to ongoing negotiations over possibly buying back Yahoo’s “41.7 percent” stake – dubbed the “Possible Yahoo Transaction” – in the company, and its possible impact on the privatization, the filing notes:

[Alibaba] has been engaged in discussions with Yahoo regarding the possibility of restructuring Yahoo’s holdings in [Alibaba]. These discussions may or may not result in an agreement and accordingly, the Possible Yahoo Transaction may or may not proceed.

The Scheme will not be conditional on completion of the Possible Yahoo Transaction nor will [Alibaba] enter into any agreement relating to the Possible Yahoo! Transaction that is conditional on the Scheme becoming effective. A further announcement will be made by [Alibaba] and [Alibaba.com] if and when appropriate.

The next major step is for a planned 24-hour suspension of the Alibaba.com stock on the HKSE on 9am of Friday, May 25th, to allow for an extraordinary general meeting. The stock will resume on the following Monday. If shareholders do indeed vote in favour of the privatization, it’s expected that the company will delist on Friday June 8th.