China’s three largest tech conglomerates are buying into the smart factory unit of Foxconn Technology Group, also known as Hon Hai Precision Industry Co., as it seeks to raise $4.3 billion in a massive Shanghai listing. The move will offer Alibaba Group (BABA), Tencent Holding and Baidu Inc. (BIDU), known collectively as BAT, large stakes in the Foxconn unit, demonstrating the sizable opportunity in markets such as 5G wireless technology. Foxconn Industrial Internet (FII), Apple Inc.'s (AAPL) most important manufacturing partner for the iPhone, is planning to use the funds from China's biggest domestic share offering in three years to double down on smart manufacturing, cloud computing and the development of next-generation wireless technology.
The three tech behemoths received 21.78 million shares each of the maker of cloud technologies and industrial robots, joining a handful of state-owned investment firms also acquiring significant stakes, according to a statement by FII to the Shanghai Stock Exchange on Sunday. A total of 20 strategic investors were allotted about 30% of the total offering size, reflecting 590.8 million shares, the statement said. Alibaba, Tencent and Baidu, respective market leaders in e-commerce, search and social media, will each own about $47 million in the soon-to-be publicly traded company, with stakes reflecting 3.86% of the company, based on an initial public offering (IPO) price of 13.77 yuan. (See also: Buy Alibaba, Not Amazon: Short-Seller Citron.)
China's E-Commerce, Search and Social Media Giants in Deal
Other strategic investors named in the FII statement include Central Huijin Investment Ltd.'s asset management unit, which agreed to purchase 58.1 million shares. A unit of China Railway Corp. will buy 43.6 million shares, while China Life Insurance Co. will acquire 34.1 million shares and internet services provider Shanghai Oriental Pearl Group Co. will take 21.8 million shares in the high-profile IPO. All backers are subject to a lockup period of three years.
FII lists Dell Technologies Inc., Amazon.com Inc. (AMZN) and Cisco Systems Inc. (CSCO) as customers, and generates about 20% to 30% of its total revenues from its partnership with Cupertino, California-based smartphone maker Apple, according to Bloomberg. The unit attributes a large chunk of its business to making frames and cases for the iPhone.
The investment from three of China's biggest rivals in the same tech firm points to their diversifying businesses, as they all push into cloud computing and data center. The news also marks their evolving relationship with Beijing, as the government seeks to lure more companies to list domestically and strengthen its relationship with tech giants. (See also: China to Woo Foreign-Listed Tech Giants Back Home.)