Chinese tech giant Alibaba has decided not to spin out its logistics limb, Cainiao, and will instead buy back shares in the outfit and integrate it more deeply with its e-commerce operations.

That's a reversal of the plan announced a year ago to split into six groups.

The change means Cainiao's planned initial public offering is off.

An Alibaba Group post featured chair Joe Tsai explaining the change of heart is down to "… the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network" which has led the biz to "believe this is an appropriate time to double down on Alibaba's investment in Cainiao."

Deeper into the statement Alibaba also reveals that a float was felt unlikely to "garner a valuation that reflects its strategic value to Alibaba’s business nor achieve the original purpose of unlocking value for Alibaba shareholders."

A filing offers a little more info by revealing "Alibaba Group plans to align part of Cainiao's business to better realize strategic synergies with Taobao and Tmall Group and Alibaba International Digital Commerce Group, as well as support Cainiao to execute a long-term strategic expansion of its global logistics network."

The web behemoth will therefore spend up to $3.75 billion to acquire the 36 percent of Cainiao it does not already own. Employees who hold shares will get a payday, as will other investors.

The pivot to keep Cainiao close is the second time Alibaba has walked back its devolution plan: in November 2023 it cancelled a planned spinout of its cloud business, citing the impact of US tech export sanctions on its ability to compete.

It told investors it intends to make accelerated growth in e-commerce and cloud computing its top priorities.

Just where the cloudy growth will come from is hard to say: Alibaba Group's most recent results included an admission that internal customers are a better source of growth than outside entities.

E-commerce is also a tough gig right now, as Alibaba faces competition from fellow Chinese e-tailers Temu and Shein.

Which may be why it's keeping Cainiao in the fold: the logistics outfit's quarterly revenue rose 24 percent year-over-year with revenue from cross-border fulfilment solutions a big growth driver.

Chinese e-tailers have fought hard to improve their reputation for actually getting stuff into buyers' hands. Alibaba's ownership of Cainiao puts it in a fine position to do so. ®

https://www.theregister.com//2024/03/27/alibaba_cans_cainiao_ipo/