Alibaba-led bid for Unigroup hits last-minute snag: sources

[BEIJING] An Alibaba Group Holding-led effort to take over China's troubled Tsinghua Unigroup has hit a last-minute snag, according to people familiar with the matter, raising the prospect that a rival bidder will close the deal for the semiconductor champion.

Chinese officials had been leaning towards the Alibaba consortium as recently as last month, but the e-commerce giant's stock listing in the US has raised recent concerns, said the sources, asking not to be named because the talks are private.

American regulators are tightening auditing requirements for US-listed companies, which could expose China's leading chip company to the disclosure of sensitive information if it were owned by Alibaba, they said.

Instead, Unigroup may turn to JAC Capital, a Chinese semiconductor investment fund that has also bid to salvage the indebted chipmaker, they said. The state-backed fund is one of the 2 remaining bidders, though Unigroup has yet to rule out the possibility of bringing in new buyers, one of the sources said.

Any final agreement would need Beijing's approval, given the company's importance. Talks are fluid, and the preferred bidders may still change.

Alibaba and Unigroup did not immediately respond to requests for comment. The Alibaba consortium, which includes funds backed by the Zhejiang government, had proposed a deal of more than 50 billion yuan (S$10.7 billion) to help keep the chipmaker afloat.

Any agreement would likely include conditions for restructuring Unigroup's roughly 100 billion yuan-plus of onshore and offshore debt, Bloomberg News reported in November.

The fate of Unigroup has become a national security issue as Chinese President Xi Jinping advances a strategy for self-sufficiency in key technologies in competition with the US.

The Beijing-based company affiliated with prestigious Tsinghua University - Xi's alma mater - remains a lynchpin in a race for technological supremacy. Unigroup expanded rapidly during a decade-long stimulus blitz that fuelled heady economic expansion through binging on credit. Unigroup and its affiliates went on an acquisition spree, buying up foreign names including RDA Microelectronics and Spreadtrum Communications en route to building China's most sophisticated maker of 5G chips in Unisoc.

BLOOMBERG