Alibaba plans $3.2bn convertible senior notes offering

Alibaba Group Holding Limited (Alibaba) is proposing an offering of approximately $3.2 billion aggregate principal amount of Zero Coupon Convertible Senior Notes due 2032. This Notes Offering is directed towards non-U.S. persons in offshore transactions, in reliance on Regulation S under the U.S. Securities Act, and is subject to market and other conditions.

The net proceeds from the offering will be allocated primarily to general corporate purposes, with a strategic focus on strengthening cloud infrastructure and international commerce. Approximately 80% of the proceeds will enhance cloud infrastructure by scaling data centers, upgrading technology, and improving services. The remaining 20% will support expanding international commerce operations through operational investments.

Alibaba also expects to enter into capped call transactions to reduce potential dilution from the Notes and/or cash payments required for converted Notes. These transactions are designed to effectively increase the conversion price to a "cap price," anticipated to be a 60% premium to the Reference Share Price, thereby lowering the company's overall cost of capital.