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5 Minute Read by (Reuters) – HONG KONG/SHANGHAI People familiar with the situation said Alibaba Group Holding Ltd and Chinese state-backed enterprises are exploring bids for a stake in Unisplendour Corp, a cloud computing infrastructure firm, that could fetch as much as $7.7 billion. PHOTO FROM THE FILE: Tsinghua Unigroup’s logo is visible in its Beijing office on November 15, 2015. Kim Kyung/Kim Kyung/Kim Kyung/Kim Kyung/Kim Kyung/K Tsinghua Unigroup, a HoonChip conglomerate with $31 billion in debt, is trying to sell its 46.45% interest in Shenzhen-listed Unisplendour as more of its borrowing payments come due, according to sources. Wuxi Industry Development Group, a company owned by the municipality of Wuxi in eastern China, Beijing Electronics Holdings, and state-backed semiconductor investment fund JAC Capital are among the potential suitors, according to the people. They declined to be identified since they were not authorized to speak on the subject. Alibaba would pair up with a firm owned by a local government if it submits an offer before the July 20 deadline for binding bids, according to two of the people. They didn’t say who their possible mate was. A successful transaction for the e-commerce behemoth would be the first since Chinese regulators began to crack down on the tech sector late last year, with the scuffling of Ant Financial’s mammoth offering. Alibaba was smacked with a record $2.8 billion penalties for antitrust offences in April. According to two of the persons, the Unisplendour share is estimated to be worth between 40 billion and 50 billion yuan ($6.2 billion-$7.7 billion). According to Reuters calculations, this represents a 34 percent -68 percent premium over the stock’s average monthly price of 22.4 yuan. Tsinghua Unigroup, which was warned by its creditors last week that they wanted it to restructure, said in a statement to Reuters that it has “approached numerous investors under the leadership of a brought-in special working team” to limit debt concerns. “If Tsinghua Unigroup enters a judicial reorganization,” it continued, “it will develop an overall plan for bringing in strategic investors.” Requests for response from Unisplendour, Alibaba, Wuxi Industry Development Group, Beijing Electronics, and JAC Capital were not returned. After news of the potential suitors was revealed by Reuters on Tuesday afternoon, shares in Unisplendour recovered their losses and were up 1%. On Monday, they rose 10% after Tsinghua Unigroup announced it had been informed of the creditors’ request for a restructuring. Two sources claimed that potential bidders for the Unisplendour holding are especially interested in the company’s controlling ownership in H3C, which manufactures server boxes for cloud computing centers. In 2015, Unisplendour paid $2.3 billion to Hewlett-Packard for a 51 percent share in H3C. In 2020, Unisplendour had revenues of 59.7 billion yuan, up 10.4% from the previous year, and a net profit of 1.9 billion yuan, up 2.8 percent. Experts say H3C would be a useful asset to players in China’s fast-growing cloud computing sector, such as Alibaba, which now leads the local cloud computing market. Alibaba recently revealed that its cloud computing segment has turned a profit. According to one of the individuals, the business, which has a market share of around 40% according to research firm Canalys, is planning to go public in the next few years. Alibaba has likewise declined to comment on its plans for a cloud computing division. Over the last decade, Tsinghua Unigroup, which is 51 percent owned by Tsinghua University and run by former real estate magnate Zhao Weiguo, has been a prolific investor in chip companies, aligning itself with a government push to grow China’s chip industry. However, few of its ventures have yielded significant returns. According to records, the group defaulted or crossed-defaulted on $3.6 billion in onshore and offshore debts as of end-2020, and as of June last year, it had only $8 billion in cash and cash equivalents compared to its $31 billion in debt. Yangtze Memory Technology Company, an up-and-coming flash memory player, and Unisoc, a developer of mobile phone processors, are two other major entities. Julie Zhu and Josh Horwitz contributed reporting; Kane Wu in Hong Kong and Andrew Galbraith in Shanghai contributed further reporting; and Sumeet Chatterjee and Edwina Gibbs edited the piece./nRead More

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