Wednesday, November 21, 2012

Baidu.com, Inc. (NASDAQ:BIDU to raise S1.5 billion in Bond sale for funding M&A and paying off debt

China’s biggest search engine, Baidu.com, Inc. (ADR)(NASDAQ:BIDU) has announced its plan to raise $1.5 billion in a two-part bond sale to write down debt and prepare itself to compete with domestic rival Qihoo 360, a search engine launched by an antivirus software company in August.

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According to Kaiser Kuo, director of international communications of Baidu, proceeds from the sale will be use for acquisition in both china and abroad which involve investment in other areas including mobile sector.

Baidu is expanding its mobile manufacturing capacity to tap China’s huge demand for Smartphones which is also world’s largest Smartphone market. Baidu has entered a multi-million-dollar JV with Docomo by the joint venture name Baidu Yi Xin and also plans to develop its own forked Android OS for mobile devices. By the end of this year, Baidu is aiming to have its new browser installed in 80 percent of Android Smartphones sold in China. It has also invested US$1.6 billion in a new cloud-computing center.

Baidu’s shares price has fallen 28 percent over last three months due to stiff competition from rival Qihoo 360.Hence Baidu’s aggressive plan to capture growing market for Smartphone is an effort to offset decline in its core business of search. According to Kuo, the mobile market will take couple of years to close the monetary gap it has suffered in the core business. Baidu has kept its M&A targets under wrap for the time being.

The proposed public offering by Baidu will be listed in Singapore stock exchange with US$750 million worth of 2.250 percent notes due in 2017 and US$750 million of 3.500 percent notes due in 2022.

 Shares of BIDU slumped 3% to $91.24.

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