EXCLUSIVE to Alibaba, others explore offers for Unisplendour stake worth up to $ 7.7 billion – sources

HONG KONG / SHANGHAI, July 13 (Reuters) – Alibaba Group Holding Ltd (9988.HK) and Chinese state-owned enterprises are evaluating bids for a stake in Unisplendour Corp (000938.SZ), a cloud computing infrastructure company, which could fetch up to $ 7.7 billion, people familiar with the matter said.

Chip conglomerate Tsinghua Unigroup, which has debt of some $ 31 billion, plans to sell its 46.45% stake in Shenzhen-listed Unisplendour as other bond payments fall due, said. they stated.

Among the potential suitors are Wuxi Industry Development Group, a government-owned company in Wuxi City in eastern China, government-owned Beijing Electronics Holdings, and the backed semiconductor investment fund. by the state JAC Capital, the people said. They were not allowed to speak on the matter and refused to be identified.

If Alibaba submits a bid before the July 20 deadline for binding offers, it will team up with a local government-owned company, two people said. They did not disclose the name of the potential partner.

A successful deal for the e-commerce giant would be the first since Chinese regulators began cracking down on the tech industry, starting with the sabotage of the Ant Financial subsidiary’s mega-list late last year . Alibaba itself was fined a record $ 2.8 billion in April for violating anti-monopoly laws. Read more

Unisplendour’s stake is expected to be valued at between 40 billion and 50 billion yuan ($ 6.2 billion to $ 7.7 billion), two people said. That would represent a premium of 34% to 68% over the average share price over the past month of 22.4 yuan, according to Reuters calculations.

Tsinghua Unigroup, who was told last week that his creditors had called for his restructuring, said in a statement to Reuters that to mitigate debt risks he had “approached several investors under the guidance of a task force special “.

“Tsinghua Unigroup will reach a comprehensive agreement to bring in strategic investors if it begins a judicial restructuring,” he added.

Unisplendour, Alibaba, Wuxi Industry Development Group, Beijing Electronics and JAC Capital did not respond to requests for comment.

Unisplendour shares erased the losses after Reuters reported on Tuesday afternoon that potential suitors were up 1%. They jumped 10% on Monday after Tsinghua Unigroup said it was made aware of the creditors’ call for restructuring.

SERVER BOXES

Potential bidders for Unisplendour’s participation are primarily drawn to the company’s controlling stake in H3C, which makes server enclosures for cloud computing centers, two of the sources said. Unisplendour bought a 51% stake in H3C in 2015 from Hewlett-Packard for $ 2.3 billion.

Unisplendour generated 59.7 billion yuan in revenue in 2020, an increase of 10.4% over the previous year and achieved net profit of 1.9 billion yuan, up 2 , 8%.

Experts say H3C would be a valuable asset for players in China’s fast-growing cloud computing industry, including Alibaba, a leader in the domestic cloud computing market.

Alibaba’s cloud computing division recently announced that it has become profitable. The unit, which has a market share of around 40% according to research firm Canalys, is looking to go public in the next few years, one of the sources said.

Alibaba also did not respond to requests for comment on plans for its cloud computing unit.

Tsinghua Unigroup, which is 51% owned by prestigious Tsinghua University and headed by former real estate mogul Zhao Weiguo, has become a prolific investor in microchip companies over the past decade, aligning itself with government efforts to boost China’s chip industry.

But few of its investments have yielded significant benefits. He defaulted or defaulted on onshore and offshore bonds worth around $ 3.6 billion at the end of 2020 and by June of last year the group had only $ 8 billion. of cash and cash equivalents against its $ 31 billion debt, according to the documents.

Other key units include Yangtze Memory Technology Company, a promising flash memory player, and Unisoc, a manufacturer of cell phone processors.

Reporting by Julie Zhu and Josh Horwitz; Additional reporting by Kane Wu in Hong Kong and Andrew Galbraith in Shanghai; Editing by Sumeet Chatterjee and Edwina Gibbs

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