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Alibaba Steals March on Tencent with ChinaVision Deal

NEW YORK (The Deal) -- Chinese e-commerce company Alibaba Group Holding late Tuesday, March 11, unveiled an HK$6.24 billion ($803.5 million) agreement to boost its minority ChinaVision Media Group stake to a majority holding  as it broadens its reach ahead of an anticipated initial public offering.

Alibaba offered HK$0.50 for 12.5 million new ChinaVision shares, a 22% discount to the stock's Tuesday close. The purchase will lift its stake in ChinaVision to 70.8% from 27%. The company has also asked Hong Kong securities regulators to waive regulations that would require it to make an offer for the entire group.

The purchase was unveiled in a regulatory notice filed by ChinaVision. ChinaVision shares exploded Wednesday, almost trebling, or rising HK$1.19, to HK$1.83 and valuing the target at HK$15.2 billion.

The acquisition is the second major purchase by Alibaba this year. Last month it announced a $1.85 billion takeover agreemetn for Beijing-based, Nasdaq-listed AutoNavi Holdings (AMAP) which, as its name suggests, offers Internet-based maps and navigation services.

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Alibaba is trying to win a broader audience for its traditional shopping sites and squeeze out rivals. ChinaVision offers entertainment content including games, movies and even professional sports.

Its shareholders also include Internet services provider and Alibaba competitor Tencent Holdings, which held 8% prior to the new shares being issued to Alibaba. That stake will be cut to 3% through the issue of new shares.

Alibaba is expected to move forward with an IPO later this year, which could prove a boon to Sunnyvale, Calif.'s Yahoo! Inc. (YHOO - Get Report) Yahoo! Owns 24% of Alibaba. The sale would be the biggest since Facebook (FB - Get Report) and is expected to have a valuation as high as $200 billion.

"We are pleased to collaborate with the ChinaVision Media Group to explore future business opportunities as part of Alibaba's digital entertainment strategy," Alibaba said.

Goldman Sachs (GS - Get Report) acted as financial adviser to Alibaba, with Reorient Financial Markets handling financial details for ChinaVision.

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