Alibaba Snags Ant Stake in Possible Prelude to Public Offering

Подписывайтесь на наш канал @east_veter :)

SHANGHAI—Chinese ecommerce giant Alibaba Group Holding Ltd. said it will acquire a 33% stake in its financial services affiliate Ant Financial Services Group, in a move that could signal that Ant is being readied for a public offering.

The Ant equity purchase was announced as Alibaba reported robust third-quarter earnings of 24.1 billion yuan ($3.82 billion), up from 17.9 billion yuan in the like quarter the previous year. That topped a forecast of 21.6 billion yuan by analysts polled by S&P Global Market Intelligence.

Revenue for the quarter increased 56% from the year-earlier period, to 83.0 billion yuan.

Ant, which was carved out in 2011 during the run-up to Alibaba’s own IPO, runs the fast-growing Alipay mobile payment platform used by Chinese consumers to purchase goods and services, including items on Alibaba’s online shopping sites.

Alibaba said it will acquire the Ant stake as part of a deal approved in 2014. In return, the ecommerce company would transfer intellectual property to Ant, with no cash impact to Alibaba.

The acquisition of the one-third stake in Ant would put Alibaba in a position to benefit if Ant were to go public, which has long been anticipated. Ant Financial was last valued at $60 billion in a 2016 financing round, and the company has grown significantly since then.

Scott Freeze, chief investment officer at Sabretooth Advisors in Pennsylvania, whose fund owns Alibaba stock, said the move suggests Alibaba is preparing its Ant affiliate for a public offering and wants to profit from the company’s mobile payments business as it expands in India, Japan and Korea and other countries.

Alibaba shares were down about 3.8% in recent trade in New York. Mr. Freeze said the sell off was an overreaction to the news, as the stake would give Alibaba access to direct revenue from Ant and more authority over decision-making.

Alibaba’s Chief Financial Officer Maggie Wu declined to comment on IPO speculation.

The companies said that following Alibaba’s stake acquisition, they would terminate their current profit-sharing arrangement which entitles Alibaba to 37.5% of Ant’s pre-tax profit, paid in the form of royalty and technology fees. There would be no cash impact to Alibaba.

Ant paid Alibaba $30 million in such fees in the three months to December, down sharply from amounts in recent quarters because Ant spent heavily to grow its Alipay user base.

Ant paid Alibaba a total of $735 million during the 2017 calendar year, implying that Ant’s pre-tax profit last year was roughly $2 billion.

In a call with investors, Alibaba Vice Chairman Joe Tsai said the Ant stake would allow Alibaba to expand its role of providing value-added services such as mobile payments to upgrade traditional brick and mortar businesses.

The agreement would also give Alibaba more firepower to expand overseas, as payment methods are a key component of online retail, he said.

In its third-quarter report, Alibaba said revenue from its core ecommerce unit—which runs China’s two most popular online retail sites, Taobao and Tmall—remained strong. Sales rose 57% to 73.2 billion yuan.

Alibaba is seeking to expand beyond online commerce into physical retail stores as well, expanding its chain of supermarkets and making a $2.9 billion investment in China’s second-largest big-box retailer Sun Art Retail in the quarter.

Alibaba said its cloud-computing business revenue more than doubled to 3.6 billion yuan, as it attracted more paying customers and introduced more paying services.

Sales from Alibaba’s digital-media and entertainment division, which includes mobile browser UCWeb, video-streaming site Youku Tudou and Alibaba Pictures Group , rose to 5.4 billion yuan. Analysts say intense competition in the digital-entertainment space will weigh on the company going forward, as Alibaba seeks to invest in more content to attract new viewers.

Alibaba’s Youku video-streaming platform attracted about 374 million monthly active users as of Dec 2017, behind Baidu-backed iQiyi and Tencent Video, according to Quest Mobile figures.