Alibaba Group Holding Ltd's bid to privatize its Hong Kong-listed business-to-business arm, Alibaba.com Ltd, could help the company retune its operating strategy and add flexibility to ongoing negotiations with Yahoo Inc, said analysts.
"Privatizing Alibaba Group's B2B sector is one of the steps for the company to build a more efficient and cooperative e-commerce platform," said Qi Jianzhe, an analyst at the Internet research company Analysys International.
Alibaba Group announced on Tuesday night that it has made a bid to buy out minority shareholders in Alibaba.com Ltd. The parent company offered HK$13.50 (US$1.76) for each share to buy a stake of 27 percent.
The offered price per share represents a premium of approximately 45.9 percent over the company's closing price of HK$9.25 on Feb 9, the day trading was temporarily suspended, said Alibaba.com's statement to the Hong Kong stock exchange.
Alibaba Group, based in Hangzhou, Zhejiang province, will need at least HK$18 billion to close the deal, said analysts.
The parent company is capable of raising adequate capital from banks and using its immense cash reserves, said Kelvin Ho, an analyst at Yuanta Securities Co Ltd. Ho added that, at the end of 2011, the company's net cash totaled more than 10 billion yuan ($1.5 billion).
Alibaba Group also signed a $3 billion loan agreement with six banks on Tuesday. The group is likely to seek more lenders to underwrite the loan, Bloomberg News reported.
"After the buyout, Alibaba Group will enjoy more flexibility to restructure its business," said Richard Ji, managing director of Morgan Stanley Asia Ltd.
Alibaba Group split its customer-to-customer and business-to-customer units in mid-2011 to help the growth of its B2C arm, Tmall.
Although Alibaba Group has denied any link between the buyout and the negotiations with Yahoo, analysts suggested that the privatization plan may help Alibaba to close a repurchasing deal with the US company.
"Alibaba.com is a non-core asset for the group, so it is possible that the repurchased stock will be used in exchange for about 25 percent of the holdings from Yahoo," according to a Yuanta Securities report.
