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Business

Alibaba to pay $266 million for newspaper

HONG KONG -- Malaysian tycoon Robert Kuok is to receive 2.06 billion Hong Kong dollars ($266 million) from Chinese e-commerce company Alibaba Group Holding for the South China Morning Post newspaper and related media properties in Hong Kong.

     The all-cash deal includes the SCMP Group's magazines, outdoor media, education and digital businesses, according to a filing by the Hong Kong-listed company on Monday. Excluded from the deal are a number of investment properties, including the newspaper's newsroom in the pricey Causeway Bay district.

     Alibaba founder Jack Ma Yun's acquisition of the South China Morning Post has often been compared to Amazon founder Jeff Bezos' purchase of the Washington Post for $250 million in 2013. More recently Japanese media group Nikkei, the publisher of the Nikkei Asian Review, bought the Financial Times from Britain's Pearson for 844 million pounds ($1.29 billion).

     The businesses Alibaba is buying from the SCMP generated HK$1.2 billion in revenue and HK$136.2 million in pre-tax profit last year, according to a company filing. These figures would imply an earnings multiple of 15.1 for Alibaba's offer, close to the ratio in the Washington Post deal.

     Shares of Alibaba, which generated $12.3 billion in revenue last year, tumbled 5.4% in New York on Friday following the announcement that a deal had been reached, though no financial details were provided then.

     "The deal value is pocket change for Alibaba," said David Schlesinger, former editor-in-chief of Reuters News and a media consultant in Hong Kong. "To the company and Jack Ma, the newspaper is more important as a platform for influence than as a financial investment. The price shows the diminished fortunes of the paper, both because of the state of the industry in general and Hong Kong in particular."

     Alibaba said Friday that it would remove a paywall that limited Internet access to SCMP articles. Executive Vice Chairman Joseph Tsai vowed to uphold the paper's editorial independence, but said his company would utilize the SCMP to counteract biased coverage of China in mainstream western media.

     The SCMP, which publishes in English, was once one of the most profitable newspapers in the world. But in addition to the advertising shift affecting most newspapers globally, the paper has particularly been hit by changes in local regulations that previously required shipping companies and listed companies to publish notices.

     Shares of the company have been suspended from trading since 2013 after its free float dropped below the 25% minimum threshold required by the local exchange. It will pay a special cash dividend to shareholders after the sale is complete.

     The SCMP was founded in 1903. Robert Kuok's Kerry Group took control of the newspaper in 1993 by paying Rupert Murdoch's News Corp. $349 million for a 35% stake. The newspaper has since come under scrutiny for toning down some of its previously detailed coverage of human rights abuses and other problems in China.

     While the deal would mark Alibaba's first venture into overseas media, the Hangzhou-based Internet company has stakes in a number of mainland based online and print media including China Business Network, a financial media service. It has also invested in social media such as U.S.-based app Snapchat and microblogging site Sina Weibo. It recently agreed to buy out minority shareholders in Youku Tudou, a Chinese video streaming site, for $3.6 billion.

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