China's biggest e-commerce firm, Alibaba.com Ltd, plans to raise as much as US$1.32 billion after setting a price range for its Hong Kong initial public offering, sources familiar with the deal said on Monday.
Alibaba.com, founded in 1999 by Jack Ma in Hanzhou in eastern China, is offering 858.9 million shares, or 17 percent of its enlarged share capital, with a price range of HK$10-HK$12 each, the sources said.
Of the offered shares, 73.5 percent are to be sold by its parent company, and the rest are new shares.
The listing will not include Alibaba's consumer arm including the auction firm Taobao, online payments unit Alipay and Yahoo China.
The indicative price range represents a price-to-earnings multiple of 40 to 48 times the syndicate earnings forecast for 2008.
With Alibaba.com's customer base growing fast, Goldman Sachs expected the company to post a 629 million yuan (US$83.7 million) net profit in 2007, a 186 percent jump from last year. In 2008, it could reach a 1 billion yuan net profit.
By comparison, peers Baidu.com Inc trade at about 78.6 times 2008 forecast earnings, while Google Inc and eBay Inc trade at 31 times and 24 times 2008 forecast earnings. Trade media Global Sources Ltd trades at 31 times.
Hong Kong-listed Tencent Holdings Ltd trades at 50 times prospective earnings.
Alibaba.com will start its marketing roadshow on Monday, with final pricing on October 26 and a trading debut set for November 6.
The company, plans to earmark 11 percent of its IPO, or US$145 million worth of shares to five cornerstone investors, including AIG, Wharf Holdings' chairman Peter Woo, and Kerry Group, with two years lock-up period.
Yahoo Inc plans to buy US$100 million worth of shares of Alibaba.com, one of the sources familiar with the situation said.
Yahoo already has a 40 percent stake in the Chinese firm's parent, Alibaba.com Group, which took over Yahoo's China operations in 2005 for US$1 billion and has been reorganizing it since.
Alibaba.com helps small and medium enterprises (SMEs) market their products through a free online platform and charges for premium features such as online storefronts and priority placements.
Alibaba dominates the business-to-business (B2B) segment, handling 69 percent of trade value.
The company operates an English-language international online marketplace, which focuses on global importers and exporters and accounts for 73 percent of the company's revenue in the first half of 2007.
It also has Chinese language domestic online marketplaces, which focus on domestic trading in China.
With more than 162 million Web users, China is the world's second-largest Internet market after the United States. The e-commerce industry is potentially lucrative if more of China's 32 million small and medium enterprises (SMEs) can be persuaded to use the internet.
According to Shanghai-based consultancy iResearch, there were 8.8 million SMEs in China, or 28 percent, using B2B services in 2006, and SMEs spent on average 10.8 percent of their marketing budget online.
Goldman Sachs, Morgan Stanley and Deutsche Bank are sponsoring the deal.
(US$1=HK$7.8= 7.5114 yuan)