Son Makes $58 Billion on Alibaba With Buffett-Type Return

CrisisInvesting

这家伙很力害
With Alibaba Group Holding Ltd. filing to go public, the biggest winner won’t be founder Jack Ma or his fellow executives or even venture capital backers like Silver Lake Management LLC. It’ll be Japan’s Masayoshi Son.

Fourteen years ago, Son’s SoftBank Corp. (9984) started with a $20 million bet on a then-unknown Web portal connecting Chinese manufacturers with overseas buyers. That site evolved into China’s biggest Internet shopping mall and SoftBank’s stake is now estimated to be worth about $58 billion, an exceptional return even by Silicon Valley’s standards.

The IPO burnishes Son’s reputation as one of the world’s savviest investors and provides more capital to a man on the hunt for deals. After taking control of the U.S. carrier Sprint Corp. last July, Son made no secret of his interest in T-Mobile US Inc. (TMUS) Analysts say he may also pursue European wireless operators or take another look at music labels, after his $8.5 billion bid for Vivendi SA’s Universal Music Group was rebuffed.

“The guy is the Warren Buffett of Asia,” said Greg Tarr, managing partner at seed fund CrossPacific Capital in Palo Alto. “In venture capital, the way we measure success is how much was put in initially and what’s the return. Every now and then you have something worth 500 times, like a Twitter (TWTR) or an Alibaba.”
Photographer: Tomohiro Ohsumi/Bloomberg

Billionaire and SoftBank Corp. Chairman and Chief Executive Officer Masayoshi Son.

Over three decades, Son used borrowed money to transform the software wholesaler he founded in 1981 into a phone company spanning two continents. In Japan, he built a challenger to larger carriers and was first to bring Apple Inc.’s iPhone to the country. He bought Sprint to take on the top players in the U.S., Verizon Communications Inc. (VZ) and AT&T Inc.
Puzzle & Dragons

The 56-year-old also created a venture-capital goliath with investments in more than 1,300 technology businesses. They include Yahoo Japan Corp., the nation’s biggest Web portal, Zynga Inc., creator of smartphone gaming hits FarmVille and Mafia Wars; and GungHo Online Entertainment Inc. (3765), maker of the Puzzle & Dragons game.

Among other more eclectic stakes: Cheezburger Network, a collection of humor websites, and Buzzfeed Inc., an online compiler of quirky lists like “58 Extremely Disappointing facts about the class of 2018” or “10 Ridiculous Things People do in the Club.”

Son’s biggest bet so far was last year’s $22 billion deal for control of Sprint, which gave SoftBank access to about 50 million U.S. subscribers. Many are just starting to use their phones to watch videos and search the Web -- pursuits already popular in Japan.
Photographer: Tomohiro Ohsumi/Bloomberg

Masayoshi Son, chief executive officer of SoftBank Corp., left, with Jack Ma, chairman... Read More

After the Sprint deal, Son last December sought about $20 billion in bank loans to buy Deutsche Telekom AG’ s 67 percent stake in T-Mobile, the smallest of the four national carriers, people familiar with the matter said at the time.
First Priority

Combining Sprint and T-Mobile would create a bigger No. 3 in the U.S. market.

“The first priority, no matter what, is to settle the U.S. situation,” said Naoshi Nema, an analyst at Cantor Fitzgerald LP in Hong Kong. “They want T-Mobile to get scale.”

Still, a similar attempt by AT&T in 2011 to buy T-Mobile was blocked by regulators, arguing consumers were better off with more choices. For his part, Son argues that he’d lower prices if a deal were allowed to go through. He plans to push forward with a T-Mobile bid, people familiar with the matter said last week.

“He’s not a man that gives up lightly,” said Neil Juggins, a Hong Kong-based analyst at JI Asia Research Ltd. “If it doesn’t happen this time, that doesn’t mean that it’s never going to work. It might be that he keeps going back and going back until the regulators are prepared to listen to him.”
Alibaba Windfall

The billionaire’s patience has paid off with Alibaba, which this week filed for what may be the largest-ever initial public offering ever in the U.S. The offering may raise as much as $20 billion and also allow Yahoo! Inc. (YHOO), its second-largest investor, to sell part of its stake.

With all of Alibaba valued at about $168 billion based on the average estimate from analysts, SoftBank’s 34.4 percent stake is worth $57.8 billion, assuming those shares translate into the same-sized holding in the listed company and there are no conditions on their ownership.

After leading the initial $20 million investment in 2000, SoftBank subsequently bought additional shares and bonds, according to the filing. Matthew Nicholson, a Tokyo-based spokesman for SoftBank, declined to elaborate on the company’s stake.

“He plants the seeds and waits for things to grow,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holding Inc. in Tokyo. “Alibaba is a pretty good example.”