Alibaba to buy out UCWeb in China's biggest internet merger

BEIJING Wed Jun 11, 2014 6:44am EDT

A woman stands next to a door inside the headquarters of Alibaba in Hangzhou, Zhejiang province, April 23, 2014.  REUTERS/Chance Chan

A woman stands next to a door inside the headquarters of Alibaba in Hangzhou, Zhejiang province, April 23, 2014.

Credit: Reuters/Chance Chan

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BEIJING (Reuters) - Alibaba Group Holding Ltd [IPO-ALIB.N] will fully acquire mobile browser firm UCWeb in the biggest merger in Chinese internet history, upping the stakes in its battle with arch-rivals Tencent and Baidu.

Alibaba's purchase of the one-third of UCWeb it didn't already hold emphasises the company's push to do more business on mobile in the world's biggest smartphone market, where it is locking horns with Tencent Holdings Ltd and Baidu Inc.

It also adds to a string of acquisitions, including a 50 percent stake in China's most successful football club. Once the deal closes, Alibaba, founded by Jack Ma, will have forked out almost $6 billion since the start of the year.

"Jack Ma has to do everything and anything he can to expand his footprint in the mobile space," said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.

Alibaba and its affiliates' acquisitions since the beginning of 2013 total at least $9.9 billion, according to Reuters calculations. Baidu spent more than $2.4 billion on acquisitions in the same period, while Tencent shelled out more than $1.9 billion.

But Tencent, China's biggest listed internet firm, dominates smartphone screens with its near-ubiquitous mobile messaging app WeChat, a situation which Alibaba executives have referred to as a monopoly.

Baidu, the third of China's internet giants, controls one of the major gateways to the Internet with a 60 percent search market share in May, according to Alibaba-owned data firm CNZZ.

"UCWeb's not a magic bullet for them," said Clendenin. "But Jack Ma's willing to go out and invest in smaller assets that can defend against WeChat."

Alibaba and UCWeb will form the UCWeb Mobile Business Group responsible for internet browsers, search services, location-based services, the mobile gaming platform, mobile application distribution and mobile literature services, UCWeb said in a statement.

"This integration will create the biggest merger in the history of China's Internet," Alibaba said on its microblog, adding that it will be larger than Baidu's $1.9 billion acquisition of 91 Wireless last year. That would value the deal, for about one-third of UCWeb, at more than $630 million, according to Reuters calculations.

Yu will act as chairman of the new business group and become part of Alibaba's strategic decision-making committee, Alibaba said.

The deal will mainly be done using Alibaba's stock, with a smaller part as cash.

($1 = 6.2277 Chinese yuan)

(Additional reporting by Beijing Newsroom and Matthew Miller in HONG KONG; Editing by Stephen Coates and Michael Urquhart)

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Comments (1)
ppp9988 wrote:
Ahh Mr. Ma again ..
The funny thing is that if companies are equipped with endless money, they go out to buy more companies. That raises a red flag in my investment habits. IF a company can not further develop their own products to gain more market share and depend on purchases of other companies, than there is certainly something wrong with the direction that the company takes. In Mr. Ma’s case there is recently a major move towards the retail markets to see. It started some years ago with Aliexpress. Now his new venture to get hold of the US and EU markets seems like a doubled effort. Insiders say the loss of clients in their original, aliexpress and taobao due to unrealistic fees, combined with the fact that western countries prefer these days domestic manufactured products, leaves Mr. Ma’s core empire on the downward path.
To buy one company after the other instead of fixing the problems that the core business has, that is not a solution.

Jun 11, 2014 7:45am EDT  --  Report as abuse
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