Synnex Corporation will sell its controlling interest in China Civilink (Cayman), which operates in China as the domain registration company HiChina Web Solutions, to Alibaba.com Limited.
Synnex, according to its statement, will receive approximately USD60 million for its estimated 79% controlling ownership in HiChina Web Solutions, subject to a 10% holdback. The transaction is expected to close before the end of calendar 2009.
After the closing, HiChina, with more than 550 employees, will become a subsidiary of Alibaba.com and will retain its own brand name and operations. HiChina's product offering will become part of Alibaba.com's Information Technology Business Unit, which is focused on providing small businesses with a comprehensive solution to challenges that arise from the implementation of hardware, software and Internet-based services as well as IT maintenance.
"While HiChina Web Solutions has been a successful and profitable business for Synnex, as we evaluated our overall business strategy and the direction we are driving Synnex for future growth and expansion, we felt HiChina Web Solutions would be better positioned with a new partner that is more closely aligned with its business strategy in China. We believe this transaction is a positive move for Synnex, HiChina Web Solutions and Alibaba," stated Kevin Murai, president and CEO of Synnex Corporation.
HiChina, www.net.cn, is a provider of Internet infrastructure services in China, including domain name services, web and server hosting services, email hosting services and website design and development services.
From Alibaba.com's side, they are dealing with more than just Synnex in their stake purchase. According to the terms of the deal issued in their own statement, Alibaba.com will acquire 85% of HiChina for a cash consideration of USD63.75 million with an additional 14.67% retained by the founders of HiChina, who will continue to be involved in daily management of the company. Dependent upon HiChina reaching certain performance targets, the founders of HiChina have an option to sell their 14.67% equity interest in HiChina to Alibaba.com over the next three years for an additional consideration of USD15.31 million in cash.
To further incentivize the founders and key employees to continue contributing to the success of HiChina after the acquisition, Alibaba.com has also agreed, among other things, to transfer certain shares of HiChina held by Alibaba.com to the management and key employees of HiChina pursuant to earn-in arrangements, subject to their meeting certain post-completion performance milestones during 2011 to 2015. If all the performance milestones are 100% met and not exceeded, the number of Earn-in Shares to be transferred over a five-year period will amount to a total of a 15% equity interest in HiChina. If any or all of the performance milestones are exceeded, the percentage of equity interest to be transferred will correspondingly increase, subject to certain limits and restrictions.
