Giant Interactive Group, a China-based online games developer, has agreed to invest $50m in local e-commerce company Alibaba Group.
Giant’s investment by the end of December will be made through an investment in Yunfeng E-Commerce Funds, which is managed by Yunfeng Capital, a China-based venture capital firm co-founded by Alibaba chief executive Jack Ma and Shi Yuzhu, president of New York-listed Giant Interactive.
Yunfeng E-Commerce Funds was set up to buy Alibaba shares as part of the latter’s employee liquidity programme.
The programme is looking to provide liquidity in the private secondary market rather than require Alibaba to float on a public stock market, according to news provider Financial Times.
Alibaba has agreed to sell $1.6bn of employee and other shareholder equity in total to private equity firm Silver Lake, internet investment firm DST Global, Singapore state investment vehicle Temasek and Yunfeng.
Yunfeng had previously co-invested with China-based games company Tencent in discount coupon provider Gaopeng, which had been set up by another DST Global portfolio company, Groupon. Tencent, in turn, had acquired 10% of DST in Russia, which is a separate vehicle to DST Global but also owns a minority stake in Groupon.
Ma said: "This liquidity program will allow our people to focus on growing our business and continuing to create value."
Alibaba’s total first-half 2011 revenue grew 22% compared to the same period last year to RMB3.16bn ($485.5m).
News provider All Things D, which revealed the stock sale, said Alibaba would be worth $32bn in total after the stock sale. US-based internet services provider Yahoo owns 43% of Alibaba and has been under pressure to sell its stake by Ma and the two firms recently clashed over the sale of the Chinese firm’s online payments network Alipay.
Silver Lake has reportedly been an interested party in buying Yahoo, which has a market capitalization of about $18bn, only slightly higher than its stake in Alibaba is now being valued at.
News provider the New York Times said Silver Lake had invested $300m in Alibaba.
Law firms Paul Weiss and Haiwen & Partners are advising Silver Lake, Temasek Holdings and a group of Hong Kong-based individual investors on the deal, news provider American Lawyer said. Goodwin Procter is legal counsel to DST, with Simpson Thacher and Debevoise & Plimpton advising Yunfeng and Alibaba, respectively.
Debrvoise & Plimpton also advised Alibaba in 2005, when Yahoo invested $1bn for its stake.