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SYDNEY/HONG KONG: Alibaba’s logistics arm aims to raise up to $2 billion via a listing in Hong Kong likely early next year, sources with knowledge of the matter said, bolstering hopes for a capital markets revival in the Asian financial hub.

Cainiao Network Technology’s initial public offering (IPO) plan comes after Alibaba flagged in late March it would split its business into six units and that most of them would explore capital raisings or market debuts to help fund future growth.

Cainiao, which has started work on the IPO, is looking to raise between $1 billion and $2 billion in Hong Kong, according to three sources. They declined to be named because the listing deliberations are private.

The planned IPO, the size of which has not been reported before, is likely to be launched in early 2024, two of the sources said.

The sources cautioned that the plans are not finalised yet and remain subject to changes.

Cainiao said it would not comment on market speculation.

Alibaba did not respond to a request for comment.

Alibaba shares plunge on SoftBank’s stake sale report

Alibaba, which acts as a massive online marketplace for buyers and sellers, has in past years picked up stakes in top express delivery players to ensure reliable services for the group.

It co-founded Cainiao in 2013 with partners including department store owner Intime Group, conglomerate Fosun Group and a handful of logistic firms. Alibaba took control of Cainiao four years later and has lifted its stake to 67% from 47%.

Cainiao, which provides software and shares data with warehouses, carriers and logistics firms, reported 42 billion yuan ($6.07 billion) in revenue in the nine months ended December, up 22% year-on-year and accounting for 6% of Alibaba’s total revenue.

The logistics arm’s IPO plan is the first of the expected capital raisings for Alibaba’s spun-off units to be reported publicly as it pursues the biggest restructuring in its 24-year history.

Analysts have said that the breakup could ease scrutiny over Chinese billionaire Jack Ma’s sprawling business empire, which has been a target of local regulators as part of a broader crackdown on private enterprises since late 2020.

The other five units include Cloud Intelligence, Taobao Tmall Commerce, Local Services, Global Digital Commerce and Digital Media and Entertainment.

IPO prospects

Dealmakers hope that Cainiao’s potential IPO, expected to be followed by market debuts from some of the other Alibaba units in the near-term, could help revive sluggish fundraising activities in Hong Kong.

While Alibaba has not divulged potential listing venues for the other units, bankers say that Hong Kong would be a preferred destination because of its proximity to the group’s home market and Sino-U.S. tensions.

About $1.5 billion has been raised from IPOs in Hong Kong so far this year, marginally above the $1.2 billion raised in the same period last year, according to Refinitiv data.

Craig Coben, the former head of Bank of America’s Asia-Pacific capital markets business, said the Alibaba spin-offs would be on the radar of major global investors.

“There will be international demand for these assets, although valuation may be a challenge given the losses that global investors have suffered from high-growth Chinese stocks,” he said.

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