By Brenda Goh and Kane Wu
SHANGHAI/HONG KONG (Reuters) -Alibaba Group on Tuesday kicked off its restructuring with a plan to list its logistics arm Cainiao in Hong Kong that would make the unit the first to be separated since the Chinese e-commerce giant announced its break-up six months ago.
Alibaba (NYSE:BABA) said on Tuesday it had submitted an application to spin off Cainiao Smart Logistics Network to the Hong Kong stock exchange, but that financial terms such as the size of the offering had not been finalised.
However, Alibaba, which holds a 69.54% stake in Cainiao, will continue to hold more than 50% of shares in Cainiao and it will remain a subsidiary of the company after the spin-off, Alibaba added.
Reuters reported in May that Cainiao aimed to raise between $1 billion and $2 billion. Since Alibaba co-founded Cainiao in 2013 with partners, including conglomerate Fosun Group and some logistics firms, the unit has become a major logistics provider in its own right in China, serving third-party customers as well as Alibaba.
Cainiao said in its prospectus that Alibaba contributed to about 30% of its total revenue in its financial reporting years between 2021-2023 and the three months to the end of June. In turn, revenue from Cainiao accounted for about 10% of Alibaba's revenue in the latest quarter.
Dealmakers have said that they hope Cainiao's IPO, expected to be followed by market debuts from other Alibaba units in the near-term, will revive sluggish fundraising activities in Hong Kong.
Cainiao will need to file with the China Securities Regulatory Commission within three working days of its Hong Kong IPO filing and receive the regulator's greenlight before going ahead with the offering.
Cainiao has appointed Citigroup (NYSE:C), Citic Securities <600030.SS and JPMorgan to be the joint sponsors of its IPO.
Cainiao has raised a total of 31 billion yuan ($4.24 billion) in three funding rounds since it was formed in 2015 and its other investors include Primavera Capital, Singaporean sovereign wealth GIC and Temasek as well as Malaysia's Kazanah Nasional, the filing showed.
U.S.-listed shares of Alibaba were down 1% at $86.35 by 1314 GMT following Tuesday's announcement.
SIX UNITS
Alibaba in late March announced its biggest restructuring in its 24-year history. It will adopt a holding company management model and split its business into six units, most of which will explore capital increases or market debuts to fund growth.
The revamp was announced a day after Alibaba founder Jack Ma returned home from a year-long stay abroad, and it dovetailed with Beijing's efforts to spur growth in the private sector after two years of crackdown.
In the months since, the company has approved a process to start external financing for its international commerce arm and was also looking to list its cloud unit.
The cloud unit, however, was hit earlier this month by the sudden departure of Daniel Zhang, who had initially left his roles as CEO and chairman of the group to concentrate his focus on the cloud business.
There has been less than $3 billion worth of IPOs in Hong Kong in the first nine months of 2023, according to London Stock Exchange Group (LON:LSEG) data, compared to $4 billion at the same time last year.
Higher global interest rates and tough new rules put in place by Chinese authorities on their companies wanting to list on overseas exchanges has been blamed by analysts for the persistently weak IPO market in Hong Kong.
($1 = 7.3085 Chinese yuan renminbi)