Alibaba affiliate plans listing
ALIBABA Group’s finance affiliate is planning an initial public offering (IPO) on Shanghai’s main board in what could be China’s highest IPO valuation since 2010.
ALIBABA Group Holding’s finance affiliate is planning an initial public offering (IPO) on Shanghai’s main board in what could be China’s highest IPO valuation since 2010, according to two people familiar with the matter.
Zhejiang Ant Small & Micro Financial Services Group had been profitable for three years, enabling it to meet the listing requirements, and might begin the process as soon as this year, the people said, requesting not to be named because the matter is private. The owner of Alipay, China’s most popular payments system, preferred a dual listing with Hong Kong if it obtained regulatory approval, the people said.
Ant Financial, which is controlled by Alibaba founder Jack Ma, dominates payments on the biggest e-commerce platforms in China through Alipay, and also manages Yu’E Bao, the country’s largest money-market fund.
The company was currently targeting a private round of fundraising for at least $3.5bn at a valuation of about $60bn, people familiar with the matter said in April.
Alipay, one of the more recognisable names in online finance and consumer payments, would be the largest web player by far on mainland bourses.
“China doesn’t have an internet company of this scale and influence, so it could enjoy a significant premium in value if it lists in the country,” said Li Muzhi, a Hong Kong-based analyst at Arete Research Services. “A lot of the potential retail investors are also Ant Financial’s users.” Ant Financial declined to comment. China’s stock listing rules require companies to be profitable for at least three years and accumulate a profit of more than 30-million yuan ($4.5m). The entities also need to generate accumulated cash flow of at least 50-million yuan, or post a total of 300-million yuan for revenue in the latest three years, according to the regulations.
Ant Financial met those measures, said the people, who have direct knowledge of its earnings. The people did not say how much the company would seek to raise or what valuation it would have at the time of listing.
An IPO at a $60bn valuation would be the biggest on the mainland since Agricultural Bank of China listed in Shanghai in 2010.
Ma, China’s second-richest man according to the Bloomberg Billionaires index, said last year he was open to a Hong Kong listing if regulators welcomed it. Alibaba’s own plans to list in Hong Kong in 2014 were derailed because the city would not waive a ban on multiple share-class structures, and the e-commerce operator instead held a record IPO in New York.
Alibaba is entitled to a stake of about one-third of Ant Financial with regulatory approval, according to a 2014 filing to the US Securities and Exchange Commission. Alibaba had perpetual rights to 37.5% of the finance arm’s pretax earnings until it acquired the stake, the filing said.
Ant Financial paid Alibaba 502million yuan in the December quarter, compared with 411-million yuan a year earlier, according to an Alibaba filing. That implies Ant Financial had pretax profit of at least 1.3-billion yuan for the period. The company posted net income of 333-million yuan in 201.
“As for Alibaba, unless it gets approval to buy the one-third stake in Ant, investors have already factored in the profit-sharing benefits it’s receiving,” Li said.
An alternative option would be for Alibaba to receive a one-time payment equivalent to 37.5% of the value of Ant Financial, determined prior to its IPO, which would amount to at least $22.5bn based on its current valuation.
The agreement was brokered after a dispute between Alibaba and Yahoo in 2011. At the time, Alibaba transferred Alipay into an entity that was controlled by Ma, citing concerns that it would not be permitted to conduct business in China while it had foreign ownership.