Alibaba Group Holding Ltd. will buy 33 percent of Ant Financial, helping to clear the way for an initial public offering of the Chinese payments giant.
China’s biggest e-commerce operator will acquire new shares in its finance affiliate in exchange for certain intellectual property rights, the company said yesterday. While no cash is changing hands, Ant Financial will end royalty payments to Alibaba that were worth more than USD300 million last fiscal year. Alibaba also raised its annual forecast after posting third-quarter sales that topped estimates.
Alibaba hasn’t held a stake in the owner of Alipay since founder Jack Ma controversially spun out the business in 2011. Ant Financial has had a string of recent setbacks, with its U.S. expansion thwarted by the collapse of a deal for MoneyGram International Inc. while its Chinese business faces greater scrutiny from regulators and increased competition from Tencent Holdings Ltd.
“This acquisition of Ant Financial’s stake could be a preparation for its potential IPO,” said Steven Zhu, a Shanghai-based analyst with Pacific Epoch. “Alibaba was able to improve revenue growth because performance-based ads were able to generate better revenue on mobile apps and its catered user pages drove more sales.”
Alibaba said revenue in the 12 months ending March will rise 55 to 56 percent, up from a range of 49 to 53 percent previously. Ma is pushing deeper into brick and mortar retailers, including supermarkets and department stories, as the company also took control of the Cainiao logistics business. Bloomberg