Alibaba buys majority stake in ChinaVision; Most of Alibaba’s recent acquisitions have been intended to shore up perceived weaknesses ahead of the IPO, mainly in the area of mobile internet

March 14, 2014 Leave a comment

March 11, 2014 2:43 pm

Alibaba buys majority stake in ChinaVision

By Charles Clover in Beijing

Alibaba, China’s ecommerce giant, has paid more than $800m for a majority stake in Hong Kong-listed ChinaVision Media Group, continuing a string of acquisitions that total nearly $3bn over the past year.

Alibaba is preparing for an initial public offering expected for this year either in Hong Kong or New York that is expected to value the company at more than $100bn. It is in fierce competition with rival internet conglomerates Tencent and Baidu over China’s vast internet market.

Most of Alibaba’s recent acquisitions have been intended to shore up perceived weaknesses ahead of the IPO, mainly in the area of mobile internet.

Alibaba’s purchase of map software maker AutoNavi, which it agreed to take private last month in a deal that valued AutoNavi at $1.6bn, is aimed at beefing up Alibaba’s mobile internet offerings. It has also bought stakes in four US based ecommerce companies including delivery group ShopRunner.

Alibaba’s revenue growth has been slowing due to competition and because it already controls 80 per cent of ecommerce in China.

The ChinaVision deal will address what analysts say is Alibaba’s competitive disadvantage in video entertainment, where it lags behind both Baidu and Tencent. China’s online video scene is already the biggest in the world, with more than 400m viewers and hundreds of millions more set to join as superfast 4G connections become more popular.

Buying ChinaVision gives Alibaba access to its television dramas, films, and mobile games. ChinaVision scored a hit last year with Journey to the West, a Stephen Chow comedy that took in $92.5m during its Chinese new year opening weekend, according to Box Office Mojo.

Original content could bolster Alibaba’s smart TV operating system, which it launched in July 2013. Last year Alibaba also bought music streaming site Xiami.

“We are pleased to collaborate with the ChinaVision Media Group to explore future business opportunities as part of Alibaba’s digital entertainment strategy, and look forward to working together for years to come,” said a spokesperson for Alibaba. No further comment was available from either company.

But Alibaba is not the only cash-rich Chinese internet company spending freely to strengthen capabilities.

Stiff competition has put pressure on companies to grow faster than they can build new businesses organically, driving billions of dollars worth of mergers and acquisitions over the past 12 months.

This week Alibaba’s main rival, Tencent, bought 15 per cent of the number two ecommerce platform in China,JD.com, in an effort to establish a foothold in ecommerce to challenge Alibaba.

 

Filed under Macro Trends, TMT Trends

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