Hong Kong-listed Alibaba.com extends gains on potential Microsoft-Yahoo deal Hong Kong-listed shares in Alibaba.com, China's largest e-commerce portal, extended their gains Tuesday after Monday's sharp rally as investors remained excited about Microsoft Corp's offer to acquire Yahoo Inc, which owns 33 percent of Alibaba.
Analysts see a Microsoft-Yahoo deal benefiting Alibaba.com because of the possible synergies with the world's biggest computer technology company.
Microsoft, which has agreed to retain Yahoo's relationships with all of its Asian affiliates, is also likely to reap rewards from an association with Alibaba.com.
""We believe Alibaba.com and its unlisted group peers may offer the combined Microsoft-Yahoo entity the best leverage in achieving a previously largely elusive foothold in the China market,"" said Deutsche Bank.
Yahoo owns 39 percent of the Alibaba group.
""Our colleagues believe an MSN-Yahoo deal would create a more aggressive ad syndication network overall which, if successful in China, would present resurgent competition for the likes of Baidu,"" Deutsche Bank said. Baidu.com Inc is the leading Chinese-language search engine.
Other companies within the Alibaba group are expected to find Microsoft more of a partner than a competitor, Deutsche Bank said. These companies include Alisoft, which sells enterprise software to Chinese small and medium enterprises.
""In short, we believe the scale, distribution, technical and balance sheet resources, and willingness to invest to compete from the combined entity could be beneficial for Alibaba group in China,"" Deutsche Bank said.
Deutsche Bank has a ""buy"" rating for Alibaba.com, with a target price of 24.80 Hong Kong dollars.
US investment bank Goldman Sachs, which is advising Yahoo on the deal, is taking a neutral view of the impact of the Microsoft-Yahoo deal on Alibaba. com.
""If Microsoft succeeds in its courtship of Yahoo, we believe that Alibaba. com investors should indeed assume merely a substitution of Microsoft for Yahoo as a minority shareholder, because Microsoft's given reasons for its interest in Yahoo revolve around Yahoo's advertising activities, whereas Alibaba.com is an e-commerce listings business,"" Goldman Sachs said.
Goldman Sachs also argues that it is unlikely that Japan's Softbank Corp, which owns 29 percent of the Alibaba group, and founders and employees, who hold a combined 32 percent, will cede control to Microsoft.
There may also be regulatory or public relations advantages for the Alibaba group and Alibaba.com if they are perceived as Asian controlled, rather than as subsidiaries of a major US corporation such as Microsoft. This would mean that Microsoft and Alibaba group would be interested in keeping their identities as separate as possible.
Goldman Sachs has a target price of 23.00 dollars for Alibaba.com. The stock was maintaining its upward momentum despite weakness in the market overall.
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