Alibaba reveals plans for partner-controlled board

May 08, 2014 08:04
Alibaba chairman will be a permanent partner of the company. Photo: Bloomberg

The 28 partners of Alibaba Group Holding Ltd. will have the exclusive right to nominate more than half of the nine-member board under a deal with two major institutional investors, the Hong Kong Economic Journal reported Thursday, citing listing documents submitted by Alibaba to the US Securities and Exchange Commission.

The documents detail how the group will remain under the control of the partners, with chairman Jack Ma and vice chairman Joe Tsai permanent partners. Ma has 8.9 percent of the group's shares and Tsai 3.6 percent.

But the company's board nominations will still be subject to a vote by the majority of shareholders. Under the agreement, SoftBank Corp., which has a 34.4 percent stake in Alibaba and a right to nominate one director to the board, has to put at least 30 percent of the voting rights of its ordinary shares into a voting trust to be controlled by Ma and Tsai.

The Japanese firm and Yahoo Inc., which holds 22.6 percent of Alibaba, are obliged to vote for any directors nominated by Alibaba's partners. The two institutional investors also need Ma and Tsai's consent to reject any other nominees. Ma, Tsai and Yahoo, meanwhile, are obliged to vote for SoftBank's nominee.

The four parties hold a combined 69.5 percent of Alibaba and will likely be able to control six to seven seats on the board.The partnership also has a right, without a need to obtain shareholder approval, to name a transitional director for one year if one of its nominees is rejected by other minority shareholders.

SoftBank chief executive Masayoshi Son said his company will not sell its stake in Alibaba as it sees the Chinese firm a strategic partner.

Some investment bankers say the deal could help prevent short-term financial shifts and management changes from affecting long-term investment strategies, a key issue given that Alibaba is still in its investment stage and technology businesses incur much higher investment costs.

The listing documents do not say which market in the US the e-commerce giant will sell its shares. Market observers expect the company will seek about US$15 billion to US$20 billion from its listing.

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