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Alibaba Takes Over UCWeb In “Biggest Merger In China’s Internet History”

Alibaba Takes Over UCWeb In “Biggest Merger In China’s Internet History”
By: Sam Quest
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Alibaba Group Holding Limited has been on a buying spree as it nears its IPO in the US. Its latest purchase, made at an undisclosed price, gives the company complete ownership over UCWeb. The deal, according to people with knowledge of the agreement, will mostly be paid for in Alibaba stock, and a small amount in cash.

The Chinese tech giant had previously owned two-thirds of the company, whose main product is a mobile browser for every mobile platform. Alibaba has been busy buying companies left, right and center as it nears its IPO, and every new deal it is making is pushing it under greater scrutiny.

 

UCWeb

UCWeb provides mobile browsing solutions. Its flagship product is the UC Browser, which is available on every major mobile operating system in 10 different languages and 150 countries. The company also controls an impressive portfolio of patents, with over 200 registered under its name in the field of mobile browsing applications alone.

UCWeb and Alibaba had already been collaborating on technologies with applications in mobile search, payments and various others areas, including apps and mobile gaming. Complete ownership of UCWeb should result in increased collaboration, synergies in the decision-making process, and a shared vision.

Alibaba Group: Overview

Alibaba Group is a holding company with stakes in many e-commerce platforms. It is also invested in companies that provide products ranging from micro-blogs to cloud services.

The company is a global leader in e-commerce: the number of transactions made through its payment services outnumbers both Amazon.com, Inc. (AMZN) and eBay Inc. (EBAY)’s combined. Alibaba generated over $3.5 billion in profits last year on revenues of nearly $8 billion, recording a net income margin of 43.75%. Amazon and eBay, on the other hand, reported margins of 0.5% and 17.8%, respectively, for the same period.

The largest share of Alibaba’s revenues is contributed by its e-commerce business in China, which generated $4.6 billion in sales in fiscal 2013, nearly double from the previous year. The Chinese retail segment drove over 87% of the company’s business in 2013, and the company will seek to double its growth with the purchase of UCWeb.

Conclusion

Alibaba’s ongoing expansion will only add to the valuation of the holding company when it finally goes public in the US. Valuation estimates prior to this announcement were ranging anywhere between $120-250 billion, but that could change if the company continues to broaden the scope of its businesses at the current rate.

The acquisition of UCWeb makes perfect sense for Alibaba, which has already a vested interest in the company. Complete control will allow it to capitalize on growth in mobile internet usage and e-commerce in the world’s most populous country. And though China is already the largest e-commerce market and the fastest-growing smartphone market in the world, mobile commerce has yet to catch up. By assimilating UCWeb, Alibaba can use synergies to build a strong product that complements its many ventures.

What’s your take on our analysis? Post your views in the comments section below, and our analyst will reply to you as soon as possible.

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