Alibaba to split into six units and explore IPOs
• Biggest overhaul of China’s online commerce leader since inception more than 20 years ago
Alibaba Group Holdings plans to split its $220bn empire into six units that will individually raise funds and explore initial public offerings (IPOs) in the biggest overhaul of China’s online commerce leader since its inception more than two decades ago.
The move frees up the Chinese company’s main divisions from e-commerce and media to the cloud to operate with far more autonomy, laying the foundation for future spin-offs and market debuts. Its share price leapt 8% in premarket trade in New York on Tuesday.
The shift to a holding company structure is rare for a Chinese tech firm and could present a template for Alibaba’s peers. Decentralising the company’s business lines and decisionmaking power addresses one of Beijing’s primary goals during its sweeping crackdown on the technology sector.
The government had criticised the influence of online platforms, particularly those of Alibaba and WeChat operator Tencent Holdings. That is likely to mean the restructuring would draw support from government regulators who have been concerned that concentrated power in tech suppressed innovation. Alibaba and Tencent invested in hundreds of start-ups over the years, often helping to craft strategy as they grew.
“It is one step in the direction with China’s policy to reduce the monopolistic nature of the tech giants,” said Marvin Chen, an analyst with Bloomberg Intelligence. “While China tech spinoffs are not uncommon, the move looks to be more encompassing, including core businesses, that may serve as a blueprint for the industry going forward.”
Alibaba’s announcement on Tuesday coincided with the return of its billionaire cofounder Jack Ma to China after more than a year abroad.
It marks a departure from the internet company’s traditional preference for keeping most of its operations under one roof, running everything from supermarkets to data centres under the main Alibaba umbrella. It’s also a signal that Alibaba is ready to tap investors and public markets, after the Xi Jinping administration’s clampdown on internet spheres wiped out more than $500bn of its value.
Group CEO Daniel Zhang will head up the cloud intelligence division, a nod to the growing role that artificial intelligence (AI) will play in the e-commerce leader’s portfolio in the long run. He will continue to run the parent company. International commerce chief Jiang Fan will head up the global digital business unit, while veteran executive Trudy Dai takes up the main Taobao Tmall online shopping division. Its other divisions include local services such as meal delivery, the Cainiao logistics group and digital media and entertainment.
“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” Zhang said in a statement. “The market is the best litmus test, and each business group and company can pursue independent fund raising and IPOs when they are ready.”
Alibaba has had previous success with spin-offs. It hived off Alipay in 2010, an unpopular move at the time that nonetheless led to the creation of Ant Group. The fintech affiliate controlled by Ma was on the verge of pulling off the world’s largest IPO before Beijing pulled the plug, and has said it would consider a second run at the market.
Despite the creation of a halfdozen business lines, Alibaba on Tuesday reaffirmed the costcutting it had pledged to shore up the bottom line. That was a conservative shift for a tech conglomerate that once spent aggressively to dominate swathes of the economy, reflecting the dissipation of growth since Xi’s crackdown ensued in 2020.
Beijing has cracked down on the country’s tech giants over the past two years, forcing fundamental changes in the business models of companies including Alibaba. The e-commerce pioneer is also navigating tough competition from archrival JD.com, as well as up-andcomers such as PDD Holdings and ByteDance.
“The innovative plan to split up its businesses, we assume, has had some kind of blessing from the authorities,” said Gary Dugan, CEO at the Global CIO Office. “In which case it will be seen as an elegant solution for unlocking the value inside the business.”