Alibaba Dances With UCWeb, Tesla, Zara

Alibaba buys out UCWeb

E-commerce leader Alibaba has always been a very active headline grabber, but these days its penchant for making news is getting a bit out of control, reflecting an M&A strategy that also looks increasingly overcharged and lacking focus. One might compare Alibaba these days to a creature that has suddenly developed a huge appetite and is devouring everything in sight. That’s my assessment today based on the company’s involvement in 3 major headlines, one involving web browsers, another electric cars, and a third that’s actually related to its core e-commerce services.

In the first of the deals, which is also the largest, Alibaba will acquire the remaining stake it doesn’t already own in UCWeb, developer of a popular mobile browser that was once pursued by leading search engine Baidu (Nasdaq: BIDU). The second deal will see a real estate company partly owned by Alibaba partner with US electric car sensation Tesla (Nasdaq: TSLA) to build dozens of new vehicle charging stations. Last there’s Spanish retailing giant Zara, which has announced it will open a store on Alibaba’s popular Tmall B2C platform.

Let’s start with the UCWeb deal, which looks similar Alibaba’s purchase of mobile mapping firm AutoNavi (Nasdaq: AMAP) earlier this year. In both cases Alibaba first bought a major stake in the company, and then went on to buy it completely,  valuing each at more than $1 billion. In the case of UCWeb, Alibaba will buy the one-third of the company it doesn’t already own for an undisclosed price. (English article)

Alibaba purchased its existing 66 percent of UCWeb in two different deals last year, paying nearly $700 million combined. That would imply the company is worth just over $1 billion, though an internal memo cited in one report quotes UCWeb’s chief executive saying the figure is much higher.

UCWeb is one of China’s most popular mobile browsers, and has been aggressively pursued by some of the country’s major Internet companies as each pursues a mobile strategy. UCWeb’s fiercely independent Chairman Yu Yongfu had rebuffed those advances, but is clearly realizing how difficult it might become to remain independent in the rapidly consolidating Internet sector. Whether Alibaba is the best choice of partner remains an open question, though Yu probably didn’t have many choices.

From UCWeb, let’s look quickly at the second Alibaba-related deal that will see Tesla build electric vehicle (EV) charging stations at shopping malls and other properties owned by developer Yintai Holdings. (Chinese article) The partnership will initially build 40 stations in Beijing and Hangzhou, and later expand to at least 30 other cities. Tesla is also working with other companies to set up charging stations, following the delivery of its first EVs in China in April.

The Alibaba connection here is more indirect, following its recent purchase of 10 percent of Intime Retail (HKEx: 1833), Yintai’s department store unit, for $700 million (previous post) I doubt that Alibaba had any direct involvement in this particular deal, though it’s possible that Yintai sought approval from Alibaba chief Jack Ma. Unlike the original Intime-Alibaba tie-up, which I didn’t really like, this new Yintai-Tesla partnership looks much more focused and logical.

Finally there’s Zara, the trendy Spanish retailing giant owned by Inditex, which has announced it is formally setting up shop on Tmall. (English article) This news isn’t really that huge, since many major global retailers already have shops on Tmall.

But the move is somewhat significant, since Inditex is the world’s largest fashion retailer and has invested millions of dollars to open an extensive network of brick-and-mortar stores in China. Thus this move is a strong affirmation of the importance of e-commerce for any retailer in China, and will certainly come as a nice addition to Tmall as Alibaba gears up for its multibillion-dollar IPO later this year.

Bottom line: Alibaba’s purchase of UCWeb is an extension of its increasingly unfocused M&A strategy, while the arrival of Zara to its Tmall marks a big symbolic win for the online shopping platform.

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