Alibaba Group Holding Ltd. will pay HK$6.24 billion ($804 million) for control of ChinaVision (1060) Media Group Ltd., giving China’s biggest e-commerce company access to content from games and films to English Premier League soccer.
The purchase of new stock, at a 22 percent discount to the previous closing price, will boost the stake held by Alibaba and parties acting with it to 70.8 percent from 27 percent, according to a ChinaVision filing yesterday. The shares rose by a record today.
The deal boosts Alibaba’s access to ChinaVision’s television programs, movies and live sport as it tries to compete with Tencent Holdings Ltd. (700) and Baidu Inc. for China’s 618 million online users. ChinaVision’s current shareholders include Tencent, which operates the WeChat message service and is attempting to compete with Alibaba in shopping and gaming.
“The acquisition can help Alibaba increase content on its platform,” said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. “It could add certain entertainment and media content into its instant messaging app, Laiwang, to increase the popularity of the app.”
Alibaba will buy 12.5 billion new shares of ChinaVision for 50 Hong Kong cents, according to the filing. The Hangzhou, China-based e-commerce operator is seeking a waiver from a Hong Kong rule requiring it to make a buyout offer for ChinaVision.
Shares of ChinaVision almost tripled to HK$1.83 at the close of trade in Hong Kong, increasing its market value to HK$15.2 billion. The benchmark Hang Seng index fell 1.7 percent.
At ChinaVision’s closing price, the shares Alibaba agreed to buy are valued at HK$23 billion, or about HK$17 billion more than the purchase price.
Tencent’s 8 percent stake in ChinaVision Media will be diluted to about 3.2 percent after Alibaba’s purchase is completed, based on the enlarged number of shares on issue. The stock fell 2.5 percent to HK$602 in Hong Kong.
Sequoia Capital 2010 owns a 12 percent stake in ChinaVision, according to data compiled by Bloomberg.
ChinaVision Media produces and distributes movies and television dramas. The company was entitled to 30 percent of investment return in the blockbuster movie “Journey to the West: Conquering the Demons,” directed by Chinese movie star Chiau Sing Chi, according to the company’s interim report in 2013.
The Hong Kong-based company co-manages the Beijing Times, the biggest morning newspaper in the Chinese capital, and has mainland mobile TV broadcast rights to English Premier League soccer for the next three seasons, according to its Website.
Alibaba, which operates e-commerce businesses including Tmall.com and Taobao, has been expanding its digital content. Last year it released a smart TV operating system and set-top box while in January it started a platform hosting mobile games to compete with Tencent.
“We are pleased to collaborate with the ChinaVision Media Group to explore future business opportunities as part of Alibaba’s digital entertainment strategy,” Alibaba said in an e-mailed statement.
Alibaba has been valued at as much as $200 billion as it considers moving toward the biggest IPO since Facebook Inc. (FB:US) The company hasn’t decided on a timeframe or venue for the IPO and hasn’t hired bankers, a spokeswoman said on March 7.
Alibaba posted its fourth straight quarterly profit gain on surging revenue. The company, founded by billionaire Jack Ma, makes most of its sales from commissions and advertising.
Net income attributable to ordinary shareholders was $792 million in the three months ended September, a 12 percent increase from the June quarter, according to a presentation dated Jan. 28 from Yahoo! Inc., which owns about 24 percent of Alibaba. Revenue rose 51 percent to $1.78 billion.
That performance pushed the company’s estimated valuation to an average of $153 billion, according to 10 estimates released starting Jan. 28, when Yahoo announced the earnings. That represents a 28 percent increase in value from the $120 billion average of six estimates in October.
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