Alibaba, State Firms Eyeing Unisplendour Stake, Reuters Says

Alibaba Group Holding Ltd. and several Chinese state-backed firms are weighing bids for a stake in cloud computing firm Unisplendour Corp. that could fetch as much as $7.7 billion, Reuters reported, citing people familiar with the matter.

Tsinghua Unigroup Co., one of the biggest Chinese defaulters of 2020, is seeking to sell its 46.45% stake in the company to cover bond payments coming due, Reuters reported. The list of potential suitors include Wuxi Industry Development Group, a firm owned by the government of the eastern Chinese city, Beijing Electronics Holdings and semiconductor investment fund JAC Capital, Reuters said, citing the people.

“To resolve debt risks, we’ve begun discussions with numerous potential investors with help from a special task force,” Unigroup said in a statement without elaborating. Unisplendour, Alibaba, Wuxi Industry Development Group, Beijing Electronics and JAC Capital didn’t respond to Reuters’ requests for comment.

Unigroup is among China’s largest chipmakers, affiliated with prestigious Tsinghua University and one of the few domestic semiconductor developers that China can count on should the U.S. close off silicon supply routes. The company at one point harbored aspirations to become the nation’s first giant in the global semiconductor industry and once planned a $23 billion bid for U.S. memory-chip giant Micron Technology Inc.

Read more: China’s Defaulted Unigroup Bonds Surge on Recovery-Rate Optimism

The company expanded rapidly during a stimulus blitz that fueled heady economic expansion through binging on credit. But concern over the scale of China’s resulting debt mountain prompted a deleveraging campaign from around 2017.

Confidence that Unigroup’s distressed assets will not get left in limbo grew after a debt-workout plan agreed in May for peer Peking University Founder Group Corp. Under the plan, Founder, which is linked to another of China’s prestigious academic institutions, will receive billions of dollars from strategic investors including a state-owned property developer. It will also impose haircuts approaching 70% on some of its creditors.

As Chinese President Xi Jinping advances a self-sufficiency agenda in key technologies in a strategic race with the U.S., investors are placing wagers on a better deal for Unigroup. Its subsidiary Unisoc has become China’s top designer of 5G mobile chips since a U.S. ban cut Huawei Technologies Co. off from its supply chain. Unigroup also runs a mega memory chip plant in eastern China’s Nanjing, a key piece of Beijing’s ambitions for chip self-reliance. Three out of the four dollar bonds sold by the firm have hovered around their highest -- albeit still distressed -- levels since at least early November after their best month ever in June.

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