| HONG KONG, April 30
HONG KONG, April 30 As Alibaba.com prepared for
its Hong Kong IPO in late 2007, details of the deal emerged in
local media, much to the frustration of Michael Yao, the
company's top financial adviser.
Yao, then at Rothschild, summoned bankers and others working
on the deal to a meeting to remind them of the confidentiality
agreements they had signed. "He read the riot act to everyone
there," said a person who was at that meeting, telling them: "If
anyone does anything, I'll make sure to find out."
"He's very soft spoken and easy going, but would act like el
capo (boss) sometimes, putting the bankers in order," the person
Seven years on, Yao is now guiding China's e-commerce giant
Alibaba Group Holding Ltd IPO-ALIB.N through a planned U.S.
listing, expected to top Facebook Inc's $16 billion IPO
as the biggest technology listing.
The big change for Yao is that he is now leading from
inside, having left Rothschild to join Alibaba.
Otherwise, there's a sense of deja vu. Yao is again closely
guarding the IPO process, keeping a tight control of an issue
that could pay out an estimated $225 million in a bumper fee day
for underwriters working on the deal.
At a March 25 meeting in Hong Kong, led by Yao, Alibaba kept
most details secret until an hour before the scheduled event -
to keep prying media at bay and avoid regulatory scrutiny from
the U.S. Securities and Exchange Commission. Some of those
invited were driven to the venue without being told where they
were going. Others arrived at the exclusive Aberdeen Marina Club
in the south of Hong Kong's island to assemble in a room booked
under a secret name, to avoid linking it to Alibaba, said people
who were at the meeting.
"When all that becomes so public ... the company is forced
to take all sorts of measures to try and avoid accidentally
tripping any regulatory or legal issues," said a person familiar
with the IPO process. "It's not so much that the company is so
secretive, it's just really more about U.S. regulations and
legal issues than anything else."
Yao, a Chinese-American and Wharton School graduate, was
hired by Alibaba in late 2012 as senior vice president, heading
the corporate finance division, and was tasked with planning
what has become the most anticipated IPO since Facebook.
A keen skier who spends downtime on the slopes at Whistler
in Canada or Hokkaido in Japan, Yao has a close relationship
with Joe Tsai, Alibaba's former chief financial officer and a
co-founder of the company with Jack Ma.
Tsai is the IPO's architect, Yao its deliverer - delicately
navigating the process to avoid the missteps taken by Facebook,
whose shares tumbled more than a third in their first month of
trading, triggering legal suits and compensation payouts.
"He's a well-rounded guy who has a lot of experience with
IPOs and equity capital markets from all sides - from the issuer
side and from the bank side," said Philippe Espinasse, a former
UBS and Nomura investment banker in Hong Kong
who worked with Yao on MTR Corp's $1.4 billion IPO in
2000 and other deals.
"Not only has he worked on the investment banking side,
structuring and selling deals, but at Rothschild he was also
involved on the other side of the table, working on the
corporate side and dealing with the bankers."
NO BIG EGO
Some of those who have worked with Yao say he is
level-headed, and doesn't hesitate to roll up his sleeves. While
he is easy going and not ego-driven, he can be very firm, though
not in a confrontational way, they added.
He is also well-connected in Hong Kong after a long banking
career in the city and through family ties. His wife is the
granddaughter of the late Tung Chao Yung, founder of Orient
Overseas Container Line (OOCL), one of the world's largest
container transport and logistics companies. Her uncle is Tung
Chee-hwa, Hong Kong's first head of government after Britain
handed back sovereignty to China in 1997.
Yao joined Goldman Sachs in New York in 1990,
straight from the Wharton School at the University of
Pennsylvania, where he graduated with an economics degree. He
moved to Hong Kong with the Wall Street bank in 1993, handling
large Chinese and Hong Kong IPOs such as MTR's listing and BOC
Hong Kong (Holdings) $2.8 billion offer in mid-2002.
From multi-billion-dollar deals, Yao switched focus to
small-and medium-sized issuers for about three years, founding
ARX Advisors Ltd, a boutique investment firm, in 2003, before
moving to DBS Group as head of equity capital markets
for DBS Asia Capital. He joined Rothschild in 2006.
There, he helped bring the Alibaba.com business-to-business
unit public, and led talks to take it private again five years
later. Yao also advised Alibaba on a series of acquisitions in
the United States and China during that period. More recently,
he helped Alibaba structure $12 billion of loans to bulk up its
warchest to fund a spate of takeovers and a $7.1 billion share
buyback from Yahoo Inc.
Yao declined to be interviewed for this article, Alibaba
spokeswoman Florence Shih said. Most of those cited in this
article didn't want to be named to avoid straining personal ties
with Yao or Alibaba.
Most of Yao's 23 years in banking have been in equity
capital markets and mergers and acquisitions, so when Alibaba
needed to borrow money in 2012 to buy back Yahoo's stock in the
company he had a lot of catching up to do - holding lengthy
talks with debt and loan specialists from Rothschild's team in
London and meetings with lenders over terms and covenants that
took "many, many long hours into the night," said those familiar
with the discussions.
A $4 billion financing package - the largest for a private
sector Chinese company at the time - caused some tension between
Yao and loan bankers.
"These were banks with different appetites for doing the
transaction. Some were more difficult, some were easier on some
situations on pricing and terms," said a person with direct
knowledge of the talks. "He did a pretty good job, putting
together a good deal without ruffling too many feathers."
Last year, Yao negotiated "an even better deal" for Alibaba
with an $8 billion loan with a group of nine banks, the person
"He's a good mix of Western-trained and thinking banker, who
is sensitive and culturally understands China. That mix is not
that common in China's banking space. That's a pretty strong
point," said one of those who has worked with Yao.
"He strikes me as technically strong, someone who's very
comfortable getting involved in execution."
(Editing by Denny Thomas and Ian Geoghegan)