Alibaba Group Holding Ltd (阿里巴巴) provided investment firm Silver Lake with a multibillion-dollar payday when the Chinese e-commerce giant went public two years ago.
Now, Silver Lake is betting that an investment in an Alibaba affiliate could help it strike gold once more.
The firm is leading a group in a US$1.1 billion investment in Koubei (口碑), a business meant to help bring local services — from restaurants to local stores — even closer into Alibaba’s orbit.
Earlier reports on the fundraising effort said that any deal would value Koubei at about US$8 billion.
Koubei is part of what is increasingly known as the online-to-offline sector, or O2O, meant to help attract customers of Internet services to physical locations and services.
As China’s Internet giants race to draw more and more consumers into their networks, they have sought to enlist local businesses in their quest.
Alibaba had already backed another O2O business, Meituan (美團網), which was one of China’s biggest sellers of movie tickets and restaurant reservations, but walked away last year and sold its stake.
Meituan later allied itself with a top Alibaba rival, Tencent Holdings Ltd (騰訊).
Koubei, whose name roughly translates into “word of mouth,” was created as a joint venture in 2015 by Alibaba and Ant Financial Services Group (螞蟻金服), the Alibaba-affiliated finance company that runs Alipay (支付寶).
The backing of those two companies has amply buoyed the young business in a fiercely competitive space.
Perhaps more important, Koubei is closely tied to Alipay, giving businesses greater insight into customers who come in using Koubei. Knowing who those customers are and how often they have been patrons could in theory allow Koubei-affiliated businesses to offer highly targeted coupons or discounts.
Koubei said it handled more than 15 million daily orders last year.
Alibaba has disclosed that Koubei garnered about US$7 billion in payment volume in the third quarter of last year.
“This is how Alibaba wants to get those people — the customers who go to restaurants or to local convenience stores — to transact and bring them more fully into the Alibaba ecosystem,” Silver Lake managing partner and managing director Ken Hao (郝也康) said in an interview.
That tight integration with Alibaba made Koubei an interesting opportunity for Silver Lake.
The US investment firm was an early supporter of Alibaba, putting US$500 million into the company in 2011 and 2012. By the time Alibaba went public in the fall of 2014, the value of that stake had ballooned to US$5.1 billion.
By the time Koubei was ready to raise money, chairman Joseph Tsai (蔡崇信) — who is also Alibaba’s vice chairman — reached out to investors who were considered friends of Alibaba.
Besides Silver Lake, the consortium includes CDH Investments (鼎暉投資), Primavera Capital Ltd (春華資本), Temasek Holdings Pte Ltd, Yunfeng Capital (雲峰基金) and Khazanah Nasional Bhd, the sovereign wealth fund of Malaysia.
By bringing in outside money, Koubei will gain both additional capital to expand and some degree of independence. It could eventually be listed as a public company, much as Ant is expected to be.
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