Alibaba stake changes hands in secondary sale

Giant Interactive is selling its LP interest in Jack Ma’s PE fund Yunfeng for $199m.

Chinese online gaming firm Giant Interactive has entered into an agreement to sell its limited partnership interests in two of Yunfeng Capital’s E-Commerce Funds, which collectively hold all of Giant Interactive’s shares in the Alibaba Group, according to a filing.

Giant’s LP stakes in Yunfeng, the private equity fund set up by chairman of Alibaba Jack Ma and founder of Focus Media David Yu, is being sold to hedge fund Tiger Global Management for $199.1 million.

The sale is expected to be completed on 14 February 2014, a Giant Interactive statement said.

Alibaba declined to comment on secondary market sales, while Giant and Yunfeng could not be reached for comment by press time.

The rare secondary sale of an LP stake in China precedes the long-awaited IPO of Alibaba, which is expected later this year, possibly in Hong Kong. Alibaba is likely to be the largest listing globally since Facebook in 2012.

A recent Reuters poll of eight analysts had put Alibaba's market value at around $140 billion and the value of the IPO at $15 billion, although Giant’s secondary sale values the company at around $128 billion, according to Reuters calculations.

Giant Interactive, which is listed on the New York Stock Exchange, is also in the midst of discussions about a potential $2.8 billion take-private proposal by Baring Private Equity Asia put forward in November last year. 

This week, Hony Capital, one of China’s most prominent private equity funds, emerged as a potential consortium member for the high-profile privatisation, which would be the largest of its kind since the $3.7 billion take-private of Yu's Focus Media in December 2012.

The consortium needs around $1.5 billion to buy the 52.8 percent of Giant it does not already own, and the consortium is also raising an underwritten loan to finance the buyout, according to media reports.