Alibaba.com Ltd., operator of China's largest trading Web site for businesses, and its parent may raise as much as HK$10.3 billion ($1.3 billion) in a Hong Kong initial public offering, said two people familiar with the sale.
Hangzhou-based Alibaba and Alibaba Group will sell a combined 858.9 million shares at HK$10 to HK$12 apiece, said the people, declining to be identified before an official statement. It's the largest IPO of a Chinese Internet company, according to data compiled by Bloomberg.
Alibaba's IPO attracted investors including Yahoo! Inc. and will make Chairman Jack Ma, who started the firm in 1998 in his apartment with $60,000, a billionaire and one of China's richest men. The sale of a 17 percent stake values Alibaba at as much as $7.8 billion and may lure other Internet companies in China, a nation with more than 160 million Web users, to go public.
"The IPO will become a landmark for Chinese Internet and e- commerce development," said Wang Lei, a co-manager of Thornburg International Value Fund in Santa Fe, New Mexico, which oversees $16 billion. "The transaction volumes among small and mid-sized companies will be phenomenal in China."
Yahoo!, a 39 percent shareholder in Alibaba Group, will buy HK$776 million of shares, the people said. Sunnyvale, California- based Yahoo! is the owner of the most-visited U.S. Internet site. An additional HK$1.1 billion was reserved for five other corporate investors.
Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley are arranging the sale. Porter Erisman, an Alibaba spokesman, declined to comment, as did spokespeople at the three investment banks.
New Billionaire
Companies can post products for sale or buy from Alibaba's Web site for free. It charges suppliers from China and Hong Kong an annual fee of 40,000 yuan ($5,294) to 60,000 yuan to become so-called premium members, giving them access to services such as a customized home page and higher placements in search results. A similar service is offered to suppliers from other regions for an annual fee of $589.
Alibaba also runs a domestic marketplace, charging at least 2,800 yuan a year for premium members.
Chairman Ma, 43, was ranked the 148th richest person in China with an estimated wealth of $650 million, according to the 2007 edition of the Hurun Report.
The IPO will "very likely" push Ma's wealth past $1 billion, said Rupert Hoogewerf, who has produced the Hurun Report since 1999. China is home to just over 100 billionaires, the report estimates.
Head Start
Alibaba had 69 percent of the Chinese e-commerce market between businesses in the second quarter, compared with 8.4 percent for closest rival Global Sources, according to research company Analysys International.
Alibaba's revenue may rise to 3.13 billion yuan in 2008 from 1.36 billion yuan last year, according to Goldman Sachs.
"It's a great business," said Dick Wei, an analyst at JPMorgan Securities Ltd. in Hong Kong. "Alibaba has a first- mover advantage that makes it very hard for competitors to chip away at their lead in the market."
The IPO values Alibaba.com at as much as 48 times what the underwriting banks estimate the company will earn next year before stock-based compensation, the people said. The price-to- earnings ratio rises to as high as 59 times after such expenses are deducted, they said.
Baidu.com Inc., owner of China's most popular Internet search engine, is trading at almost 82 times estimated 2008 earnings on the Nasdaq Stock Market, according to Bloomberg data. Tencent Holdings Ltd., China's biggest online chat-service provider, is valued at 48 times forecast earnings.
Yahoo trades at 53.6 times estimated 2008 earnings, while Global Sources is valued at about 30.4 times.