Alibaba gains 33% of Ant Financial in conclusion of spinoff deal

By Nicole Jao
1 min read

Chinese e-commerce giant Alibaba has received a 33% equity interest in its fintech affiliate Ant Financial, closing a deal proposed five years ago, the company said Tuesday.

Why it matters: The deal further strengthens Alibaba’s relationship with the fintech firm and bumps up its valuation.

  • The transaction hints that Ant Financial’s long-anticipated initial public offering (IPO) could be near. Ant Financial is one of the world’s most valuable startups after closing a record $14 billion fundraise at $150 billion valuation in June.

Details: Alibaba announced Tuesday that it had received the green light to take a 33% equity interest in Ant Financial in newly issued shares.

  • The deal officially terminated the profit-share agreement that required Ant Financial to pay Alibaba royalties and technology service fees equivalent to 37.5% of its pre-tax profits each quarter, the company said.

Context: In 2014, the Alibaba and Ant Financial agreed on a profit-sharing deal in the run-up to Alibaba’s IPO in the US.

  • That profit-sharing agreement followed a dispute in 2011 between Alibaba and major shareholders Yahoo and Softbank. Alibaba founder Jack Ma spun Alipay, the company’s most prized asset, out of Alibaba into a separate entity he controlled, citing concerns about restrictions on foreign investors in Chinese payment companies and sparking outrage from investors.
  • In February 2018, Alibaba said it would take a 33% equity stake in Ant Financial, ending the profit-sharing agreement and giving Alibaba shareholders a share of the financial business.
  • Since its inception in 2004, Ant Financial has grown into a financial technology giant that offers payments, micro-lending, digital banking, and insurance services. It also operates the country’s largest money market fund.
  • Alibaba and Ant Financial already have a close relationship. The two previously participated in investments including in India’s fintech startup Paytm.