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Silver Lake, DST back China's Alibaba

by Mary Kathleen Flynn | Published September 22, 2011 at 3:31 PM

A group of investors including U.S. private equity firm Silver Lake and Russian Internet investor DST Global announced a commitment Thursday, Sept. 22, to invest an undisclosed amount in Alibaba Group Holding Ltd., China's largest e-commerce company.

Reports Thursday pegged the investment amount at $1.6 billion, placing a valuation of $32 billion on the Hangzhou-based company. Other investors in Alibaba's latest round include Chinese private equity firm Yunfeng Capital and Singapore-based Temasek Holdings Pte. Ltd. Alibaba operates popular Chinese online shopping sites including Taobao Marketplace and Taobao Mall.

"Alibaba is a technology company of profound importance and growth potential," said Ken Hao, Silver Lake managing director and head of Asia. "We have developed a strong relationship with Alibaba's management over several years, and this commitment reflects our confidence in the company's leadership position and the growth of the e-commerce market in China."

Silver Lake is still basking in the success of its sale of Internet phone service provider Skype Technologies SA to Microsoft Corp. for $8.5 billion in cash, two years after a consortium led by the PE firm took it off eBay Inc.'s hands for less than a quarter of that. The PE firm, with offices in Menlo Park, Calif., New York, London, San Francisco, Hong Kong and Tokyo, reportedly has contacted Yahoo! Inc. about buying the struggling Internet company. Yahoo! owns a 40% stake in Alibaba. How the new investment in Alibaba will affect Yahoo!'s strategic planning remains unknown. Selling the stake would pose challenges due to tax and other issues.

For DST, the deal follows a steady stream of large investments in fast-growing U.S. Internet companies, including Facebook Inc., Groupon Inc., Twitter Inc. and Zynga Inc.

Alibaba's primary objective with the investment is to provide liquidity to Alibaba's employees, the company said. The employee liquidity program will in part be carried out through a tender offer to employee shareholders and option holders as well as certain other shareholders. The tender offer is expected to close within four to six weeks.

The investment follows a wave of deals in China's Internet sector. Microsoft recently struck a Web-search partnership deal with Baidu Inc., the country's largest search engine developer. Previously, Baidu acquired Qunar, which offers Chinese consumers real-time searches for travel tickets and packages, for $306 million. More deals are expected as China's largest Internet companies expand.

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Silver Lake, DST back China's Alibaba

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