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Alibaba eyeing listing in HK to raise US$20b: sources

The deal would give the e-commerce giant a war chest to keep investing in technology

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Since its US listing, Alibaba has nearly doubled in size to become the largest-listed Chinese company with a market value of more than US$400 billion.

Hong Kong

ALIBABA is considering raising as much as US$20 billion through a listing in Hong Kong, people familiar with the matter told Reuters, lining up a second blockbuster deal following its 2014 record US$25 billion float in New York.

The deal, the biggest follow-on share sale in seven years globally, would give Alibaba a war chest to keep investing in technology - a priority for China as growth flags and as the world's second-largest economy faces a mounting trade spat with the United States.

The e-commerce giant is working with financial advisers on the offering and is aiming to file an application confidentially in Hong Kong as early as the second half of 2019, three people said on condition of anonymity as the plans are not public yet. They cautioned that many details were not clear, including the final planned size.

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One person with direct knowledge said it was more likely to be between US$10 billion and US$15 billion.

At US$20 billion, Alibaba's deal would be the sixth-biggest follow-on share sale ever, Refinitiv data shows, ranking behind NTT's 1987 US$36.8 billion sale, crisis-era offerings of US$24.4 billion and US$22.5 billion from the Royal Bank of Scotland and Lloyds Banking Group, as well as the US$20.7 billion raised by US insurer AIG in 2012. A spokesman for Alibaba declined to comment.

SoftBank Group, Alibaba's largest investor, did not immediately respond to a request for comment. The Japanese tech investor has a 28.8 per cent stake, worth US$115.7 billion, in Alibaba after it sold a small part of its original holding via derivatives to fund its acquisition of chip designer ARM in a transaction that completes next month. SoftBank founder and CEO Masayoshi Son is a close friend of Alibaba founder Jack Ma. Bloomberg was the first to report the plan for a Hong Kong listing.

Since its US listing, Alibaba has nearly doubled in size to become the largest-listed Chinese company with a market value of more than US$400 billion. A Hong Kong listing would give mainland investors their first direct access to one of China's biggest success stories, via the stock connect trading link between Hong Kong, Shanghai and Shenzhen.

It would also give the company an extra pocket of liquidity and potentially a better valuation if the household name became a favourite among retail investors in Hong Kong.

A Hong Kong-based analyst said while Alibaba is not in need of cash, the listing could help it improve its access to loans from Asian banks.

"It means closer access to Chinese investors, and maybe Chinese investors are more bullish than the global investors in Alibaba," the analyst added.

Rival Tencent, which is listed in Hong Kong, is trading at 26 times its expected earnings compared with Alibaba's 22 times in New York, according to Refinitiv data. A Hong Kong listing for Alibaba would come as its 54-year-old founder prepares to step down as chairman in September, handing over the mantle to CEO Daniel Zhang.

An Alibaba float would be seen in Hong Kong as a victory, after the city lost the tech giant's initial public offering to New York because its then rules precluded it accepting Alibaba's governance structure, where a self-selecting group of senior managers control the majority of board appointments.

Hong Kong amended its rules last year to make it easier for "innovative companies" listed in New York or London to carry out a secondary listing in Hong Kong, as part of a broader shake-up of the city's listing regime. REUTERS