Alibaba gets 33% stake in Ant Financial ahead of IPO

Chinese retail and internet conglomerate Alibaba Group Holding has received approval from the country’s regulators for a restructuring of its financial services affiliate Ant Financial that gives Alibaba 33% equity in the fintech ahead of the company’s public offering. 

The move will also terminate the profit-sharing arrangement of Ant Financial with Alibaba, according to a statement issued by the New York Stock Exchange-listed Alibaba.

Under the agreement, Ant Financial paid 37.5% of its pre-tax profits to Alibaba Group for its SaaS services, the statement added. 

Alibaba had proposed acquiring fresh stakes in Ant Financial in February last year to clear ownership issues ahead of the IPO. The company has, however, not made an official announcement regarding the public offering. 

According to media reports, Ant Financial was valued at $150 billion in its last financing round in June 2018 when it raised $14 billion. Singapore’s sovereign wealth fund GIC, Warburg Pincus, Canada Pension Plan Investment Board (CPPIB), Silver Lake and Temasek Holdings had participated in the funding. 

The company registered $200 million in pre-tax profit for 2018-19, according to Alibaba’s annual report. 

Ant Financial Services Group, previously known as AliPay, was hived off from Alibaba as a separate entity in 2014 with Alibaba founder Jack Ma holding considerable voting rights in the company even after subsequent rounds of funding. The move to hive off AliPay saw opposition from then investors of Alibaba, Yahoo and SoftBank, which led to a profit-sharing agreement between the two entities.

The current restructuring helps clear the ownership structure of Ant Financial, which also runs micro lending, credit rating, wealth management and online banking businesses. Brands under Ant Financial include Alipay, Ant Fortune, Zhima Credit and MYbank. It also runs the world’s largest money-market fund Yu’eBao. 

Ant Financial’s global interests include strategic investments in Indian digital wallet company Paytm and foodtech company Zomato. 

Ant Financial is also an investor in major payment and fintech companies across the world including Ascend in Thailand, KakaoPay in South Korea, bKash in Bangladesh, Openpay in Mexico, among others, according to a report in CBInsights.