Alibaba Eyes Stake In Chinese Cloud Computing Infrastructure Firm: Report

Alibaba Group Holding Limited BABA, which has a thriving cloud business, is contemplating a deal to strengthen the unit.

What Happened: Alibaba, along with Chinese state-backed companies, are exploring the possibility of picking up a stake in the Shenzhen-listed cloud computing infrastructure firm Unisplendour Corp., according to Reuters.

This follows Unisplendours' parent company Tsinghua Unigroup contemplating offloading a 46.45% stake in Unisplendour as it is grapples with a debt burden amounting to $31 billion, the report said.

If Alibaba succeeds in tabling a bid by the July 20 deadline, it would reportedly join hands with a firm owned by a local government.

The stake earmarked for sale will likely be valued at 40 billion yuan to 50 billion yuan ($6.18 billion-$7.72 billion), Reuters said, citing two sources.

Related Link: Alibaba Analyst Says Regulatory Environment 'Challenging,' But Worst Is Over

Why It's Important: The report on a possible deal from Alibaba comes against the backdrop of the Chinese government's clampdown on big tech firms, including Alibaba.

Chinese regulators scuttled Alibaba's plans to list its Ant Financial subsidiary late last year.

Additionally, the subsidiary was forced to organize as a bank holding company subject to more rigorous regulations and disclosure norms.
Alibaba was also slapped with a $2.8-billion fine by regulators for flouting anti-monopoly law.

Alibaba's cloud computing business is among the company's fastest-growing segments.

Despite growing 37% year-over-year to $2.56 billion in the March quarter, the segment's share of the total revenues in the March quarter dropped from 11% in 2020 to 9% in 2021.

BABA Price Action: Alibaba shares were trading 2.61% higher at $210.85 at last check Tuesday. 

Related Link: Where's Alibaba's Jack Ma And What's He Up To?

Photo: Alibaba co-founder Jack Ma. Benzinga file photo by Dustin Blitchok.