HONG KONG – Alibaba Group Holding has bought one-third of Ant Financial, the operator of Alipay, China's leading online payment system. However, it remains uncertain whether the restructuring paves the way for Ant's long-awaited listing.
Alibaba receives the 33% interest in exchange for terminating a profit sharing agreement requiring Ant Financial to divest 37.5% of its pre-tax profit to the Chinese e-commerce group.
Ant Financial, controlled by billionaire Jack Ma, was rated The deal announced on Tuesday brings Ant Financial closer to an initial public offering, according to analysts such as Hao Hong, Head of Research at Bocom International. However, others consider it unlikely that Alibaba investors would get exposure to Ant Financial under the new structure, and companies would need to focus on Ant's profitability in the face of growing competition.
The transaction joins again two of the largest technology companies in China and comes within days after the resignation of Ma from Alibaba, the company he founded.
Ant Financial was spun off Alibaba in 201
"Because of the close relationship between the two companies, this is part of corporate planning," Hong said. "There has been speculation for some time that Ant Financial is going public, so anybody who wants to list such a valuable position wants to make sure he has substantial control over it, which could be the reason."
Although Ant has done so Bankers and investors have been speculating for well over two years about an upcoming IPO in New York, Hong Kong or the mainland.
"Ma was the link between the two companies." Brock Silvers, managing director of investment firm Kaiyuan Capital in Shanghai, said the formalization was likely to be part of Alibaba's post-Ma positioning. "" Ant is a key component Alibaba's planned growth story, and both companies are looking for a successful flotation of Ant. However, an initial public offering of Ant remains complex. "
Alipay of Ant has 900 million active users per year in mainland China and more customers through partnerships in markets India, Thailand, Bangladesh, Indonesia, Hong Kong, Malaysia, and South Korea.
Ant Financial is highly profitable and paid approximately $ 237 million in royalties and software service fees to Alibaba in the June 30th quarter under a profit-sharing agreement However, the company faces an increasing threat from the long run year-old Alibaba rival Tencent Holdings suspended.
Although Alipay remains the undisputed leader in digital payment in China, Tencents WeChat Pay has gained ground in recent years and controls a 39% share market, according to Bernstein Research.
Paul Schulte, founder of Schulte Research and a 27-year equity analyst at companies such as China Construction Bank, Nomura an d Lehman Brothers, said Tuesday's deal could affect an exchange listing as investors in Alibaba would automatically get a stake "Ant Financial will soon go public and management would prefer to avoid competition instead of sacrificing on a quarterly basis. " to pay more attention to profitability than to ward off WeChat Pay's competition.