Alibaba buys a third of Jack Ma’s Ant Financial

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Alibaba Group Holding Ltd. has bought a third of Ant Financial, the online financial services behemoth controlled by billionaire Jack Ma, augmenting a global array of investments now worth $83 billion.

The Chinese e-commerce leader has closed the acquisition of 33% of newly issued equity in Ant, a long-gestating deal that cements ties between two of the country’s biggest technology corporations. Ant will now stop paying 37.5% of its pre-tax profits to Alibaba as mandated under an earlier agreement, the online retailer said in a statement.

The deal formally links Ma’s two signature corporations just as protege and Chairman Daniel Zhang takes the helm of China’s largest online commerce company. Since starting as Alipay in 2004 as the main way for Alibaba’s shoppers to pay for goods, Ant Financial has grown into a $150 billion behemoth spanning micro-lending and insurance to credit-scoring and the country’s largest money-market fund. It’s acquiring assets overseas via deals in India and Thailand, en route to a potential initial public offering.

“Every year we generate new stuff and we acquire new stuff. We never stop,” Zhang told Alibaba’s annual investor conference in Hangzhou. “Payment and financial services are very important pillars in Alibaba’s system.”

Zhang on Tuesday set a goal for Alibaba to have 1 billion annual active users contribute 10 trillion yuan ($1.4 trillion) of transactions by 2023. Ant’s payment business -- China’s most popular transactional tool --- will prove instrumental by helping direct traffic to e-commerce and on-demand services such as food delivery. In return, Alibaba gives Ant insights into consumer credit and loan demand.

Ant however is contending with heightened competition from the likes of Tencent Holdings Ltd. in online finance and payments, while struggling to halt an exodus of capital from its main investment vehicle. Like Alibaba, it’s grappling with the fallout from U.S.-Chinese trade tensions, which have depressed consumer spending across the world’s No. 2 economy. Alibaba has a projection for revenue to grow about 33% in the year ending March 2020.

The deal announced Tuesday seals their alliance and places Ant at the heart of a global portfolio of investments that runs the gamut from artificial intelligence giant SenseTime Group Ltd. to augmented reality outfit Magic Leap. Those acquisitions are collectively worth $83 billion, Chief Financial Officer Maggie Wu said.

The Alibaba-Ant deal unwinds an earlier agreement brokered to resolve a 2011 dispute with shareholder Yahoo! Inc. They clashed after Alibaba transferred the fast-growing Alipay into an entity controlled by Ma, citing concerns that it wouldn’t be permitted to conduct business in China while it had foreign ownership.

Alibaba had been entitled to 37.5% of Ant Financial’s pretax earnings based on that deal, struck in the run-up to Alibaba’s record-breaking 2014 IPO. Officially named Zhejiang Ant Small & Micro Financial Services Group Co., the company remains one of Ma’s most closely watched assets, and tightly linked to Alibaba.

Alibaba will continue to consolidate its core e-commerce business with physical retail and location-based services, while helping merchants and brands digitize their operations using its data and cloud technology.

“Today we see a highly integrated operation,” he said. “We are in the process of digitizing the entire value chain of commerce.”

Bloomberg News
Digital payments Mobile payments Online payments Alibaba Ant Financial