(The author is a Reuters Breakingviews columnist. The
opinions expressed are his own)
By John Foley
BEIJING, May 20 (Reuters Breakingviews) - Alibaba’s initial
public offering is going to be less about the forty thieves, and
more about the fight for fees. The unlisted Chinese e-commerce
giant is already an important source of advisory and financing
revenue in a weak market. If a highly anticipated stock market
listing comes to pass, it could become China’s biggest payer of
fees to global investment banks in a decade.
As the company has expanded, chairman Jack Ma has overseen
the listing and de-listing of subsidiary Alibaba.com, the
arrangement of a $3 billion syndicated loan, the restructuring
of payment engine Alipay, and a buyback of shares from U.S.
investor Yahoo. Such deals generated combined fees of $176
million since 2007, according to Thomson Reuters Freeman data,
based on public disclosures and proprietary estimates. That’s
more than any other non-state Chinese company over the same
The treasure keeps coming. Alibaba recently secured another
$6.5 billion syndicated loan from a consortium led by nine
banks, according to IFR. Based on an average arrangement fee of
around 1.7 percent, the payday was worth about $110 million.
Graphic: Alibaba and the fight for fees: here
The next big event could be an initial public offering. The
company doesn’t comment on its plans. But given that valuation
expectations range from $60 to $100 billion, it’s no stretch to
think that Alibaba and its backers could sell $15 billion of
stock, a bit less than Facebook did in 2012. Apply a 1.75
percent commission, and the spoils could be $260 million.
All in, that would take Alibaba to roughly $550 million in
fees over a decade – ranking only behind oil producer CNPC and
lender ICBC in Greater China. Moreover, unlike Alibaba, CNPC and
ICBC have paid the lion’s share of their fees to domestic
Even after an IPO, Alibaba is likely to continue generating
fees from acquisitions and share trades, as big shareholders
like Yahoo sell down. Little wonder, then, that battle lines are
already being drawn. SoftBank (9984.T), the Japanese company
that owns a third of Alibaba, recently warned banks not to
finance a rival bid for U.S. telecom Sprint (S.N), or risk being
left out of the e-commerce giant’s flotation, sources told
That may be an idle threat, but given Alibaba’s prospects,
few investment banks would be prepared to put it to the test.
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
- SoftBank has asked investment banks not to finance a rival
bid for Sprint Nextel Corp by Dish Holdings, saying that doing
so could hurt their chances of winning a role on an Alibaba
listing, two people with knowledge of the matter told Reuters.
- The Japanese telecom company owns 33 percent of Alibaba,
which is China’s biggest e-commerce operator through its online
store, Tmall, and consumer-to-consumer marketplace Taobao.
Yahoo, the U.S. internet group, owns around a further 23
- Alibaba does not comment on its IPO plans, and has neither
set the timetable for an initial public offering nor hired
underwriters. But the terms of a shareholder agreement with
Yahoo give the company an incentive to complete a listing before
the end of 2015.
- Alibaba bought a 28 percent stake in digital mapping
company AutoNavi Holdings on May 10, for $294 million. At the
end of April, the company acquired an 18 percent stake in
microblog Sina Weibo for $586 million.
- The company has also arranged $6.5 billion of syndicated
loans, according to IFR on May 16. Of that, $2.5 billion carries
an arranger fee of between 1 and 1.5 percent, dependent on the
amount each bank agrees to take on, while $4 billion carries a
fee of 1.75 to 2.25 percent.
- Graphic: Alibaba and the fight for fees: here
- Graphic: What is Alibaba worth?: link.reuters.com/myc67t
- Reuters: SoftBank asks banks not to finance Dish's Sprint
Opening Sesame [ID:nL3N0DH0SO]
Alibaba and the twelve digits [ID:nL3N0DA0FS]
- For previous columns by the author, Reuters customers can
click on [FOLEY/]
(Editing by Peter Thal Larsen and John Foley)
(Research by Robyn Mak)
Keywords: BREAKINGVIEWS ALIBABA FEES
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