Alibaba’s logistics arm eyes up to $2.65 billion via Hong Kong IPO: Sources

SYDNEY - Alibaba’s logistics arm aims to raise up to US$2 billion (S$2.65 billion) via a listing in Hong Kong, likely early in 2024, said sources with knowledge of the matter, bolstering hopes for a capital markets revival in the Asian financial hub.

Cainiao Network Technology’s initial public offering (IPO) plan comes after Alibaba flagged in late March that it would split its business into six units, and that most of them would explore capital raisings or market debuts to help fund future growth.

Cainiao, which has started work on the IPO, is looking to raise between US$1 billion and US$2 billion in Hong Kong, according to three sources.

The sources cautioned that the plans are not finalised yet and remain subject to changes.

Alibaba, which acts as a massive online marketplace for buyers and sellers, has in past years picked up stakes in top express delivery players to ensure reliable services for the group.

It co-founded Cainiao in 2013 with partners that include department store owner Intime Group, conglomerate Fosun Group and a handful of logistic firms. Alibaba took control of Cainiao four years later, and has lifted its stake to 67 per cent from 47 per cent.

Cainiao, which provides software and shares data with warehouses, carriers and logistics firms, reported 42 billion yuan (S$8 billion) in revenue in the nine months ended December, up 22 per cent year on year and accounting for 6 per cent of Alibaba’s total revenue.

The logistics arm’s IPO plan is the first of the expected capital raisings for Alibaba’s spun-off units to be reported publicly as it pursues the biggest restructuring in its 24-year history.

Analysts have said that the break-up could ease scrutiny over Chinese billionaire Jack Ma’s sprawling business empire, which has been a target of local regulators as part of a broader crackdown on private enterprises since late 2020.

The other five units are Cloud Intelligence, Taobao Tmall Commerce, Local Services, Global Digital Commerce, and Digital Media and Entertainment.

IPO prospects

Dealmakers hope that Cainiao’s potential IPO, expected to be followed by market debuts from some of the other Alibaba units in the near term, could help revive sluggish fund-raising activities in Hong Kong.

While Alibaba has not divulged potential listing venues for the other units, bankers say Hong Kong would be a preferred destination because of its proximity to the group’s home market and US-China tensions.

About US$1.5 billion has been raised from IPOs in Hong Kong so far in 2023, marginally above the US$1.2 billion raised in the same period in 2022, according to Refinitiv data.

Mr Craig Coben, the former head of Bank of America’s Asia-Pacific capital markets business, said the Alibaba spin-offs would be on the radar of major global investors.

“There will be international demand for these assets, although valuation may be a challenge, given the losses that global investors have suffered from high-growth Chinese stocks,” he said. REUTERS