AutoNavi Acquired by Alibaba for $1.5 Billion

Acquisition Lies in LBS Growth not Map Data Ownership

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Chinese LBS and digital map provider AutoNavi has agreed to be acquired by giant chinese e-commerce group Alibaba in a deal valuing the purchase at $1.5 billion.

Alibaba was the largest shareholder in the company (28%) since May 2013.

The deal is expected to close during the third quarter of 2014
The shareholders of the Company will receive US$5.25 in cash per ordinary share or US$21.00 in cash per American depositary share. The price represents a premium of 27 percent over the stock price the last trading day before the Alibaba proposal.

Revenue and profit decline but fast growth of mobile users
The acquisition of AutoNavi comes at a time where the company was facing a change in business model on the mobile market.

AutoNavi 2013 revenue were $141.7 million, down from $159.7 million in fiscal year 2012. Net loss was $25.4 million in fiscal year 2013, compared to net income attributable to AutoNavi of $36.5 million in fiscal year 2012. While its cost of map collection and processing has increased, its automotive, web, mobile and enterprise businesses have declined. The company has notably lost BMW as a map data customer in its latest car models.

The interest for Alibaba is the fast growth of AutoNavi’s mobile map and mobile navigation apps. Users of AutoNavi's mobile map application grew to over 200 million as of the end of the fourth quarter of 2013, up from 98 million as of the end of 2012. The monthly active users of this app are 92 million.

In addition AutoNavi's mobile navigation application was downloaded and pre-loaded on a total of approximately 98 million smartphones in the fourth quarter of 2013, compared to 83 million in the third quarter of 2013.

Looking at these numbers it is clear that Alibaba is not paying $1.5 billion for a money losing digital map provider but for a fast growing mobile apps company.