Just days after word emerged of a major shake-up in the newsroom of the South China Morning Post (00583.HK), new reports are saying that Chinese e-commerce giant Alibaba may be interested in a major investment or even outright purchase of Hong Kong’s leading English-language newspaper.
Sourcing on the reports is quite flimsy, which makes me slightly skeptical that such talks are happening.
That said, the rumors do have some logic, since the SCMP’s current owner is reportedly looking to sell the newspaper group which presently has a relatively modest market value of about HK$2.8 billion (US$360 million).
What’s more, Alibaba has also been moving aggressively into the media and entertainment spaces, as seen from its recent purchase of leading online video site Youku Tudou and establishment of a joint venture with a leading mainland financial newspaper.
Let’s begin with a look at the market rumors, which are based on a report this week in China Daily, the mainland’s largest English-language newspaper. Reflecting just how uncertain the paper was about the information, it didn’t even mention the SCMP in its headline and simply said that Alibaba could be planning a Hong Kong “media raid”.
Reading a little further, the article simply alludes to “rumors” from an unnamed source over the weekend that Alibaba was in discussions to invest in SCMP’s parent, SCMP Group. Alibaba declined to comment on the rumors, and the China Daily couldn’t reach SCMP for comment.
The rumors may be linked to the nearly concurrent reports of a management shake-up that will see longtime editor Wang Xiangwei leave the SCMP and be replaced by the China-friendly Tammy Tam from January 1.
The sourcing for the Alibaba-SCMP story is certainly quite shaky, but let’s look at the reasons why such a bid would be logical and therefore could actually be a possibility.
For starters, Alibaba has been on a multibillion-dollar acquisition spree over the last two years, and media and entertainment assets are certainly one of its main focuses.
Much of that has been aimed at new media, including the US$3.7 billion purchase of Youku Tudou that was announced over the weekend. In other deals, Alibaba had in 2013 bought significant stake in social media giant Weibo, often called the Twitter of China.
Traditional media investment
But let us not forget that Alibaba, at the same time, has also been showing interest in the more traditional news media.
One of its biggest moves on that front came earlier this year, when the company formed a financial news and information joint venture with China Business Network (CBN), one of China’s leading financial newspapers owned by traditional media titan Shanghai Media Group (SMG).
SMG was active in Hong Kong’s traditional media sector recently, as its China Media Capital (CMC) investment arm purchased an undisclosed stake in the city’s leading television broadcaster TVB (00511.HK). But I do think that particular investment is unrelated to any bid Alibaba might now be making for SCMP.
On the other side of the equation, SCMP Group’s longtime owner, the Kuok family of Malaysia, has been reportedly looking to sell the asset for some time due to the fading allure of traditional print media.
Reflecting its fading attraction, SCMP stock has moved steadily downward over the last two-and-a-half years, losing about 10 percent of its value over that period. Earlier rumors had said that Chinese financial conglomerate Citic was interested in a purchase, but nothing came of it as the asking price was too high.
All of that brings us back to the original question of whether Alibaba is bidding for SCMP, and if so what’s the bigger picture. Given the shaky sourcing in the China Daily report and what we know about Alibaba and its past behavior, I would say there’s perhaps a 50-50 chance that talks are really happening.
If a deal were to occur, I would expect Alibaba to buy a minority stake at first in the SCMP due to the politically sensitive nature of mainland investments in Hong Kong media.
At the end of the day, Alibaba probably wouldn’t be a bad owner for the newspaper due to its private background and relatively hands-off management approach to its acquisitions. It could even bring some new partnerships with strong potential through its SMG and Weibo connections, which could help to revive the SCMP’s falling fortunes.
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