A CONSORTIUM, led by Alibaba Group Holding Ltd., has emerged as the frontrunner to take over Tsinghua Unigroup Co., a deal that could fetch more than 50 billion yuan (US$7.8 billion) to help keep China’s indebted chip champion afloat.

The government is leaning towards the Alibaba-led offer given the e-commerce giant’s financial heft and the potential synergies with its own cloud and semiconductor business, people familiar with the matter said.

The consortium, which includes funds backed by the provincial government of eastern China’s Zhejiang, is edging out several competitors for Beijing-based Unigroup, several other people said.

A successful deal could help avert one of China’s biggest potential corporate failures, while securing for Alibaba valuable chip know-how and a supply of semiconductors to fuel the country’s largest cloud computing platform. While the transaction is expected to be completed as soon as December, negotiations are ongoing and details on timeline, deal size and a final buyer could still change, they said.

Alibaba is mostly known for its ecommerce leadership, but the Hangzhou-based firm has in recent years made enormous headway into computing and last month unveiled one of the country’s most advanced chips.

Any deal is likely to include conditions for restructuring Unigroup’s roughly 100 billion yuan-plus in onshore and offshore debt, another person familiar with the discussions said. Alibaba representatives yesterday had no immediate comment, while a Unigroup spokesperson didn’t immediately respond to requests for comment.

Aside from the Alibaba-led consortium, several State-backed companies, including semiconductor investment fund JAC Capital, Wuxi Industry Development Group and Beijing Electronics Holdings, also weighed bids, the people said.

Investors are placing wagers on a better deal for Unigroup as China advances a self-sufficiency agenda in key technologies.

Beijing-based Unigroup expanded rapidly during a decade-long stimulus blitz that fueled heady economic expansion through binging on credit. Unigroup and its affiliates went on an acquisition spree, buying up foreign names including RDA Microelectronics Inc. and Spreadtrum Communications Inc. en route to building China’s most sophisticated maker of 5G chips in Unisoc. (SD-Agencies)