ChinaVision shares surge after Alibaba takeover deal

Shares in entertainment firm ChinaVision Media Group surged when it resumed trading on the Hong Kong Stock Exchange Wednesday, boosted by the news that China's largest e-commerce company Alibaba has agreed to buy a controlling stake.

Alibaba Investment Ltd, an investment arm of Alibaba Group, will buy a 60 percent stake in ChinaVision for the price of HK$6.24 billion ($803.7 million), according to a statement from ChinaVision released late Tuesday.

The company's shares closed at HK$1.83 on the Hong Kong bourse on Wednesday, soaring 185.94 percent from February 25 when its shares were halted for trading ahead of the announcement.

"It (the takeover of ChinaVision) is an important step for Alibaba to explore the cultural and digital entertainment sector," Gu Jianbing, a spokesman for Alibaba, told the Global Times Wednesday.

Major Chinese Internet companies have been trying to get into each other's territory as competition in the sector gets fiercer. Alibaba's major rival Tencent announced Monday that it would acquire a 15 percent stake in China's No.2 online retailer jd.com, which has been a strong competitor of Alibaba in the e-commerce front.

ChinaVision's business involves TV and film production, print media and mobile new media, according to its website. Analysts noted Alibaba's investment in the company would give Alibaba access to movie content as well as a presence in the digital entertainment sector, such as smartphone games, where Tencent enjoys a leading role.

Tencent Inc previously had an 8 percent stake in the company, but its stake was diluted to 3.2 percent after Alibaba's takeover.

Xue Yongfeng, an analyst at consulting firm Analysys International, noted that Tencent's business in digital entertainment has generated big profits for the company, and Alibaba should catch up its rival as it is comparatively weak in the sector.

Alibaba has been ramping up investment in the digital entertainment sector recently. On January 8, Alibaba launched a smartphone gaming platform and one month later it said that it would build a digital entertainment and gaming development center in South China's Hainan Province.

ChinaVision's website shows that the company is running the advertisement and circulation of Beijing Times, a popular local newspaper in China's capital. The information has prompted media reports that it is trying to have a presence in media via the investment in ChinaVision. Tencent already has its own news portal qq.com.

"To get a presence in the media sector is one of the perks that come with the takeover deal, but I think Alibaba is mainly after the much more promising cultural and digital entertainment sector," Hou Tao, vice president at EntGroup, an entertainment research service provider, told the Global Times.

The takeover of ChinaVision comes at a time when Alibaba is actively preparing for its IPO, and Hou noted that the takeover deal could bump up Alibaba's valuation at the future IPO.

In January, Alibaba, together with a fund company, spent HK$1.3 billion for a 54 percent stake in Hong Kong-listed CITIC 21CN Co, an information and content service provider. Alibaba's takeover of Hong Kong-listed companies has prompted speculation that Alibaba may use the shell to get listed in Hong Kong.

Alibaba did not comment on the matter on Wednesday, except to say that it "still does not have a schedule for the IPO." ChinaVision declined the Global Times' interview request Wednesday.

Alibaba has been very active in enlarging its business scope recently. On February 19, it said that it would wholly acquire mapping and navigation firm AutoNavi. All its moves, including its push into the entertainment sector, are "to increase its valuation at the forthoming IPO," said Analysys International's Xue.

Alibaba's expansion into entertainment industry in China

Jan 2013 Alibaba acquires xiami.com, a music-streaming service provider, reportedly for $20 million

Apr 29, 2013 Alibaba buys 18 percent stake in Sina Weibo for $586 million

Jan 8, 2014 Alibaba announces the launch of a smartphone gaming platform

Feb 27, 2014 Alibaba announces that it will invest $816 million to build a digital entertainment and gaming center in South China's Hainan Province

Mar 11, 2014 Alibaba buys 60 percent stake in ChinaVision Media Group Ltd for $804 million