Jack Ma buys the South China Morning Post: 5 things about the deal

Jack Ma, chairman of Alibaba Group, is offering HK$2.06 billion (S$375.6 million) for Hong Kong's flagship English-language newspaper, South China Morning Post.
Jack Ma, chairman of Alibaba Group, is offering HK$2.06 billion (S$375.6 million) for Hong Kong's flagship English-language newspaper, South China Morning Post. PHOTO: BLOOMBERG

Jack Ma's Alibaba Group Holding is offering HK$2.06 billion (S$375.6 million) for Hong Kong's flagship English-language newspaper, South China Morning Post (SCMP).

The deal is reminiscent of the sale of The Washington Post to Amazon founder Jeff Bezos, and raises hopes that Mr Ma will be able to rejuvenate the 112-year-old newspaper.

But it has also raised concerns about editorial independence in Hong Kong, which is increasingly wary of Chinese rule.

Here are five things about the media deal:

1. Is Alibaba getting a good deal?

Yes, says Bloomberg. No, according to AFP.

The business had been valued at half that amount, AFP said.

But Bloomberg reports that the Chinese e-commerce giant is buying the SCMP's media assets at 10 times the latest annual adjusted earnings, compared with the 17 times Mr Bezos paid in 2013 for the Washington Post at US$250 million (S$353 million).

Earlier this year, Nikkei's $1.3 billion purchase of the Financial Times was valued at 35 times its adjusted operating profit, while the SCMP acquisition is valued at a multiple of 15.

According to Thomson Reuters data on Dec 11, SCMP Group Ltd's media assets have a market value of HK$3.04 billion.

The deal also includes licences to several publications, including Hong Kong editions of Elle, Cosmopolitan and Harper's Bazaar.

2. Owned by tycoons

Mr Ma is taking over SCMP from Malaysian billionaire Robert Kuok who has been the media group's major shareholder since 1993.

Mr Kuok, 92, acquired his stake in what was once the world's most profitable newspaper from Australian media mogul Rupert Murdoch. He paid US$349 million then.

Mr Kuok told The Straits Times in an earlier interview that the sale was purely a "business decision" amid talk that the deal was at least partially influenced by politics.

3. Digital future

Analysts say that an alliance with Alibaba will have upsides for SCMP's future in the digital era.

Mr Ma has said that he believes there could be better synergy between media outlets and businesses that work with Alibaba, such as retailers on its e-commerce portals.

Alibaba executive vice-chairman Joseph Tsai said that the paper will provide top coverage "for anybody who cares to know more about China and to understand China".

He also said the company can use technological expertise and its digital assets to distribute news in new ways.

4. Political considerations

Some call Alibaba's purchase of SCMP a "national service".

There is speculation that Mr Ma is responding to Chinese President Xi Jinping's calls last year for the establishment of new media firms which have credibility and are competitive.

Media observers expect the newspaper to become more pro-Beijing, a trend which started before this deal, according to some.

Mr Tsai has pledged that editorial independence will be upheld, but he also made clear the SCMP will provide an alternate narrative to western media coverage of China.

5. Buying spree in media industry

Alibaba has made more than 20 investments in mainland China's media sector since 2013.

One notable early investment was in Sina Weibo, China's Twitter-like microblog portal.

Last year, it bought ChinaVision Media and renamed it Alibaba Pictures. It is China's biggest film company today, and produced blockbuster Mission: Impossible - Rogue Nation.

In June this year, the company agreed to pay US$194 million for an undisclosed stake in China Business News, a Bloomberg-like financial news and data provider.

In November, it acquired video streaming giant Youku Tudou.