Alibaba Group Holding US$3 billion senior loan facilities
Bookrunnners: ANZ, Barclays, Citi, Credit Suisse, DBS, Deutsche Bank, HSBC, Intesa Sanpaolo, Mizuho, Morgan Stanley
Most years, the top award from China would either be some giant initial public offering from a state entity or possibly an offshore acquisition from the country’s hungry national champions. But there were few impressive deals conducted in either market during 2012.
Most of the equity offerings that took place struggled amid languishing conditions, and the few that performed had little to recommend them in terms of greater market impact. And while there was a decent flow of mergers and acquisitions (M&A) activity, little of it was particularly unique or eye-catching. The one possible exception was Cnooc’s designs on Canadian company Nexen, but that transaction was held up by political concerns and only gained the green light after our awards period had ended.
Instead, we chose to award a loan from the country; most specifically the two tranche syndicated facilities put into place to support Alibaba Group’s buyout of half the stake that Yahoo! held in the Chinese internet company.
The acquisition itself was reasonably run of the mill; Yahoo! is not doing particularly well globally and its shareholders wanted some reward for sticking with the company, and its most valuable asset had become its 40% stake in Alibaba, which has become China’s most successful eCommerce company. Meanwhile the latter was keen to reduce the influence of its US minority owners.
The biggest issue was ensuring that Alibaba, a successful internet services company but one with relatively few physical assets, could afford to reduce that stake. Local banks were not willing to touch the financing, so it had to look to a group of foreign banks instead.
The loan was conducted in September, during challenging market conditions. Despite this the syndicate of lead banks was willing to help one of China’s most successful and aggressive private companies. It even gained the support of Taiwanese banks, who are not frequent players in offshore deals.
In the end Alibaba was able to conduct the largest ever private financing package for a private sector Chinese company, biggest ever non-leveraged buyout (LBO) private financing for a technology company globally and the largest internet M&A transaction in the last decade.
The flexibility of loan structure allowed Alibaba to both privatise its Hong Kong-listed subsidiary Alibaba.com ahead of a planned larger listing this year for the entire group, while allowing it to buy half of Yahoo!’s 40% stake.
Alibaba was even more aggressive just a few months later, getting most the original lenders to conduct a new loan that took out this debt at even more competitive rates. While that might be seen as being slightly too greedy, it demonstrated the company’s financial smarts. Alibaba’s financial success also offers promise for other asset-light technology companies seeking funds to support their growth.