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April 3, 2014
MW Transaction Analysis  

Alibaba's Jack Ma Acquires 20.6% Stake in Hundsun

 
Financial Overview (in USD)
  • Transaction Size:                                                   $531.4 million
  • Enterprise Value:                                                      $2.52 billion
  • EV/LTM Revenue:                                                                 14.3x
  • EV/LTM EBITDA:                                                                   73.9x

Transaction Facts  

  • A holding company that is 99.1 percent controlled by Alibaba Group Holding Ltd. Chairman Jack Ma, will pay $531 million to acquire a 20.6 percent stake in Hundsun Technologies (SHSE:600570) and become Hundsun's largest shareholder.
  • Hundsun provides IT and software solutions to financial clients such as banks, insurance firms and brokerages, as well as government, transportation and education sectors.
  • With this deal, Ma continues to invest in the Chinese financial system even as major banks in the country have been ordered to cut ties with Alibaba's online financial products. One of the biggest such products is Yuebao, a financial product that enables users to take money from their Alipay accounts and invest it in a money-market fund offering higher returns than savings accounts in China's big state-run banks.
  • The deal, which requires approval from China's Ministry of Commerce, is not expected to impact Hundsun's 2014 financial results. 

Acquiring Greater Access And Stronger Capabilities

  • Acquiring Market Access: Hundsun is the only IT company that meets all the regulations to be fully licensed by the Chinese government as a one-stop solution provider in the BFSI space in China. Their clients includes China's big four banks, and according to their 2012 Annual Report, they have achieved market shares in Asset Management, Securities, Insurance and Trust of 93%, 80%, 90% and 75%, respectively. With this investment, Alibaba automatically acquires the resources to have a jump start entering the financial space.
  • Bolstering Alibaba's Existing Offerings: In November 2013, Alicloud, a subsidiary of Alibaba, announced that it would offer cloud-based financial services. This service will provide online payment solutions at a low cost to more than 2000 regional banks in remote areas in China. By leveraging Hundsun's technology and Ali's current payment solutions, the service will substantially improve the e-commerce experience to the online shoppers around those areas.
  • Potential Game Changer: In 2007, Hundsun acquired Fund123.cn, the largest direct sale fund platform for individual investors in China. With a combination of Ali's current traffic and Fund123.cn's license, we expect to see an even more disruptive product and platform than the current market leader, Yuebao, which poses a huge threat to traditional commercial banks and fund management companies.

For more information, see this letter (in Chinese) from Hundsun's General Manager Shufeng Liu.

 

 martinwolf was not the advisor in this transaction. 


About martinwolf    

 

                
             San Francisco, CA                                                Bangalore, India

With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in nine countries. We are a five-year member of the Merrill Lynch PS Referral Network, and are a strategic partner of the Enterprise Advisory department of CICC, China's first joint-venture investment bank.

 

The firm is also a presenting sponsor of the Global IT M&A Forum.   

 

martinwolf is a member of FINRA and SIPC. For more information, visit www.martinwolf.com.  

 

To learn more about martinwolf, contact Matthew Putzulu at mputzulu@martinwolf.com.

 

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