BEIJING - DST Global Solutions and Silver Lake LLP have agreed to invest as much as $1.6 billion in China's Alibaba Group Holding Ltd, in a transaction that values China's largest e-commerce company at $32 billion, said two people familiar with the deal.

Silver Lake and DST, the technology fund managed by Russian billionaire Yuri Milner, will buy stock from Alibaba employees, according to a statement on Friday.

Temasek Holdings Pte, Singapore's State-owned investment company, and the Chinese private equity firm Yunfeng Capital, will also participate, the statement said. The size of the investment was given by people who asked not to be named because terms of the agreement are private.

Alibaba is taking a cue from US Internet companies including Facebook Inc and Twitter Inc, which have used private investment rounds to let employees cash in shares. By doing so, the companies will relieve one of the major pressures for holding an initial public offering.

"This liquidity program will allow our people to focus on growing our business and continuing to create value," said Jack Ma, Alibaba chairman and chief executive officer, in the statement.

Alibaba, which is expanding beyond e-commerce to build a search engine and a mobile operating system, is adding two of Silicon Valley's most prominent technology investors as it competes with its larger rival Baidu Inc, the Beijing-based Internet company that fields about 75 percent of China's search-engine traffic.

DST, an investor in Facebook, last month led an $800 million financing round in Twitter, which plans to use about half of that sum to buy back shares from employees. Silver Lake, the private equity firm that this year sold its holdings in Skype Technologies SA to Microsoft Corp, is also considering a bid for Yahoo! Inc, which holds a 43 percent stake in Alibaba, according to two people familiar with the matter last week.

Alibaba's Ma clashed with former Yahoo CEO Carol Bartz over issues including the sale of Alibaba's online payment network, Alipay. Bartz was fired earlier this month, clearing the way for Yahoo to consider selling its stake in Alibaba, a person familiar with the matter said this month.

Terms of the Alibaba investment were reported on Friday by the AllThingsD blog.

Bloomberg News

(China Daily 09/24/2011 page10)