Buyout plan boosts hopes on Alibaba
Updated: 2008-02-05 07:19
By Hui Ching-hoo(HK Edition)
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Investment banks hold positive views on the outlook of Yahoo's affiliate Alibaba Group - the mainland largest online business-to-business service provider - in view of Microsoft's buyout bid for the holding group.
Microsoft launched the $46.6 billion offer in a bid to acquire Yahoo last week. The offer price represents a 62 percent premium to the closing price of Yahoo's shares last Thursday. Talks between the two parties are ongoing.
Despite Yahoo's some 39 percent stake in Alibaba Group and 33 percent shares in its listing arm Alibaba.com, a Goldman Sachs' report said that the buyout is unlikely to shake the strategic position of Yahoo in Alibaba Group.
The report said Yahoo's position would not be threatened over Microsoft's CEO Steve Ballmer's remark about the company's plan to buy out Yahoo.
The report anticipated that Alibaba.com might eventually benefit from its cooperation with Microsoft in terms of software development and reputation in the eyes of developed world buyers.
Goldman Sachs ranked the shares of Alibaba.com neutral, and rated its target price over the next 12 months at HK$23.
A Citigroup's reports said that Alibaba.com could be one of the winners in the buyout.
The report said that if the acquisition realizes, Microsoft might inject part of its mainland Internet-related assets into Alibaba Group that would strongly enhance its competitiveness.
It predicted that advertising revenues of Alibaba Group could be strongly boosted with the backing of Microsoft. Meanwhile, another mainland online search engine Baidu is expected to be the main loser in the acquisition.
Fuelled by the possible acquisition, shares of Alibaba.com yesterday surged significantly by 13.5 percent or HK$2.4, closing at HK$20.3.
First Shanghai Securities Strategist Linus Yip said the buyout bid would not generate direct impetus to Alibaba.com. He attributed yesterday's surge to the shares being oversold over the past days.
Yip suggested investors should keep an eye on IT stocks because of their high price-to-earnings ratio. "Investors are better to park their money in blue-chips given the market is highly volatile."
Alibaba Group entered into agreement with Yahoo in 2005 that Yahoo would splash $1 billion for 39 percent stakes of Alibaba Group. Alibaba Group in return took over all the assets of Yahoo mainland arm, which included Yahoo China, www.yisou.com, and www.taobao.com. An Alibaba.com spokesperson declined to comment.
(HK Edition 02/05/2008 page2)