Alibaba Group Holding Ltd (BABA), the Chinese e-commerce giant that holds more than an 80% market share, has purchased a 15% stake in Beijing Shiji Information Technology Co Ltd for $457 million. The deal will boost Alibaba’s travel-booking business, Taobao.
Alibaba’s Taobao and Tmall online marketplaces, similar to Amazon.com, Inc. (AMZN) and eBay Inc (EBAY), attract millions of customers on a daily basis. Taobao allows customers to make online reservations and bookings, and provides various other travel-related facilities. It was launched in 2010 to compete against Ctrip in China.
Alibaba has employed an aggressive strategy of acquisitions and alliances. Other than partnering with online businesses, it is also entering agreements with traditional brick-and-mortar companies to gain access to their huge client bases. More than a dozen deals have already been signed this year, with Alibaba engaging in expansion efforts to attract existing customers of the businesses it partners with.
The e-commerce giant has been trying to grow its Taobao business since last year. It had previously made an investment in Qyer.com, for an undisclosed amount, to allow Taobao to get more services from the website, as well as a higher number of customers. It also made investments in SINA, the online media company that has over 400 million customers.
The recent investment comes after Alibaba raised over $25 billion from its initial public offering (IPO) in the US. Beijing Shiji provides a wide range of technology and software services to over 6,000 hotels in China. It is the preferred vendor for International Hotel Groups like Hyatt Hotels Corporation (H), Starwood Hotels & Resorts Worldwide Inc (HOT), and Hilton Worldwide Holdings Inc (HLT).
The deal will give Alibaba access to back office services, and will allow the transfer of Beijing Shiji’s huge client base (of hotel customers) to Alibaba’s online shopping and travel-related services.
With a huge amount of money available from its IPO, it seems Alibaba will continue its aggressive strategy. It will try to further expand its network, and increase influence over various diversified markets.
Currently, Alibaba stock is trading at $90.46 on the New York Stock Exchange, up from its starting price of $68 at its IPO earlier this month.
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