Deal may lift Alibaba’s value before IPO
Print Edition
A deal for e-commerce giant Alibaba Group that offers it more options to profit from its Alipay payment service may potentially boost its valuation in a highly-expected initial public offering in the United States later this year.
The Alibaba Group will receive 37.5 percent of pretax profit from Alipay parent Small and Micro Financial Services, and could get up to a 33.3 percent stake in the company after regulatory approval, according to an updated prospectus filed to the US Securities and Exchange Commission yesterday.
If the government does not approve the shareholding structure, Alibaba will get a one-off minimum payout of US$9.38 billion if Alipay or its parent firm goes public, based on Alipay’s minimum listing requirement of US$25 billion.
Small and Micro’s assets include Tianhong Fund Management Co, Zhong An Insurance Co, small loan related business operations and a possible private banking business.
Employees now own 40 percent of Small and Micro, and Alibaba Group founder Jack Ma’s ownership will be cut over time to about 8.9 percent, equal to his 8.9 percent shareholding in the Alibaba Group.
The Alibaba Group’s valuation may rise sharply as Alipay can provide a lot of value-added income as it expands into more industries in the coming years, said an industry source familiar with Alibaba businesses.
Alipay’s stakes were transferred to Small and Micro, a separate domestic entity controlled by Ma, in 2011 to gain regulatory approval for its payment service.
Yahoo Inc and SoftBank Corp, two major shareholders in Alibaba, said in separate statements they supported Alibaba’s filing.
China’s mobile payment transactions hit 1.64 trillion yuan (US$266 million) in the second quarter, and Alipay has a 79.5 percent market share, according to consultancy Analysys International.
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