In recent years, Silver Lake has made a habit of gold-plated deals. The firm was a major early backer of Alibaba (NYSE: BABA), emerging from the company’s 2014 IPO with a stake reportedly worth more than $5 billion. Last year, meanwhile, Silver Lake partnered with Dell to acquire EMC for around $67 billion in the largest tech buyout in history.
Now, the California-based firm is returning to the Alibaba universe as part of a new 10-figure investment.
The target: Koubei, a provider of local services that was formed as a joint venture between Alibaba and affiliate Ant Financial in 2015. According to Alibaba’s most recent quarterly statement, Koubei has raised $1.1 billion in equity financing in a round led by Silver Lake and Chinese investors Yunfeng Capital, CDH Investments and Primavera Capital. All four firms have invested with Alibaba and Ant Financial in the past.
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Koubei is an ecommerce company that works to forge consumer connections between the digital and physical worlds, helping adapt the business models of brick-and-mortar operations for the online retail space. Customers used Alibaba’s Alipay service to spend about RMB73.1 billion (~$10.5 billion) on the Koubei service during last quarter, a 52% QoQ increase.
Competition in the sector is fierce, with Chinese rivals such as Baidu (NASDAQ: BIDU), Meituan-Dianping and Ele.me all raising billions to invest in local services operations since the start of 2015. Last April, Alibaba and Ant Financial made a $1.25 billion commitment to Ele.me; rather than pitting the two businesses against each other, though, Alibaba plans to incorporate Ele.me with Koubei in some way, according to TechCrunch.
That will be just fine with Silver Lake—so long as, in a few years, the firm is again swimming in the sort of massive profits its previous investments in Alibaba have reaped.
Article by Kevin Dowd – PitchBook