Alibaba: Purchase of Minority Stake in Cainiao Won’t Materially Change Alibaba’s Earnings

We maintain wide-moat Alibaba Group Holding, or Alibaba‘s, fair value estimate at USD 94 per ADS and HKD 91 per share after 1) the withdrawal of the Hong Kong IPO application of Alibaba’s logistics subsidiary Cainiao Smart Logistics Network; and 2) Alibaba’s offer to purchase the 36.3% stake held by Cainiao's minority shareholders for total consideration of up to USD 3.75 billion. We think this consideration is priced at the high end of the valuation range due to the need to maintain the morale of Cainiao’s employees, who are also shareholders. The consideration only represents 4% of Alibaba’s cash, cash equivalents, short-term investments, and equity securities and other investments in the current assets as of Dec. 31, 2023. Cainiao’s December-quarter adjusted EBITA accounted for only 3% of Alibaba’s total adjusted EBITA. Therefore, purchasing a minority stake in Cainiao won’t have a meaningful impact on Alibaba’s balance sheet and earnings.