HONG KONG â€" Shares in the state-backed company Citic 21CN soared as much as 500 percent in Hong Kong on Friday after it said that Alibaba Group, the Chinese Internet behemoth, had acquired a controlling stake in it for 1.3 billion Hong Kong dollars, or $170 million.
Tremendous buying among local speculators pushed trading volumes in shares of Citic 21CN â€" a small technology company that operates a pharmaceutical data platform in China â€" to more than 100 times their average volumes, as investors made big, bold bets that Alibaba might try to use the company as a shell for a backdoor stock market listing. Citic 21CN shares finished at 3.92 dollars, or 372 percent above the last closing price.
Those trades may prove overly optimistic.
‘‘There’s no intention to do a backdoor listing,’’ one person familiar with the companies’ plans said Friday.
Under Hong Kong’s securities regulations, Alibaba would have to wait at least two years before injecting assets that change Citic 21CN’s fundamental business. Any moves to do so before then would generally be treated by regulators as an initial public offering and subject to the same demanding disclosure requirements as an I.P.O.
Nor would a backdoor listing allow Alibaba to get around Hong Kong’s restrictions on dual-class share structures or other arrangements that give founders a disproportionate say in shareholders’ votes. Alibaba put plans for a Hong Kong listing on ice last year after regulators refused to sign off on a plan that would let its core executives nominate a majority of board positions.
Analysts, investors and bankers have been eagerly awaiting Alibaba’s next step toward an I.P.O., which could take place later this year and would be one the world’s biggest such deals since Facebook’s $16 billion I.P.O. two years ago. The Chinese company has yet to appoint bankers for a deal, or to formally indicate whether it will attempt to list in New York, Hong Kong or another market.
Citic 21CN announced the investment by Alibaba late Thursday. Under the terms of the deal, Alibaba and Yunfeng Capital, a private equity group set up in 2010 by the Internet company’s billionaire founder, Jack Ma, will team up to acquire 4.4 billion new shares in the company at 30 Hong Kong cents apiece â€" a steep 64 percent discount to the 83 cents at which the stock last traded before the transaction was announced.
Citic 21CN explained that the deal price had been negotiated on the basis of its own liquidity position and financial performance, and with regard to Alibaba’s ‘‘strategic value and industry and operational expertise.’’
Alibaba will end up with a 54 percent stake in Citic 21CN and replace five of the six executive directors on the company’s board. Chen Xiaoying, the vice chairwoman of the company, will stay on as an executive director and retain her 10 percent stake. The state-owned Citic Group will also retain a 10 percent stake.
Alibaba plans to continue with Citic 21CN’s existing business. ‘‘The intention is for the group to further develop and expand its domestic drug data platform, as well as to develop a data standard for medical and health care products,’’ Citic 21CN said in its filing. ‘‘This may involve the possible injection of certain complementary businesses’’ by Alibaba, it said.
Chinese Internet giants have been expanding into nontraditional areas with their recent acquisitions.
In the past week, Tencent Holdings said it would pay nearly $200 million for an operator of warehouses and factory outlet malls, and a provider of logistics services. In December, Alibaba invested about $360 million in Haier Group, one of China’s biggest manufacturers and distributors of household appliances, in a deal that joins the two companies in a new logistics business partnership.
By branching into drug data services, Alibaba can leverage its deep technical expertise and data gathering and processing capabilities to try to capture demand for information in China’s sprawling and tightly regulated pharmaceutical supply market.
