Alibaba to buy 33% stake in Ant Financial

Posted February 02, 2018

Alibaba said it will acquire newly-issued shares from Ant Financial in exchange for certain intellectual property rights.

Ant operates the world's largest mobile and online payment platform, Alipay that has 520 million Chinese users and over 200 financial institution partners in China. While no cash is changing hands, Ant Financial would end royalty payments to Alibaba that were worth more than US$300 million last fiscal year.

Alibaba also announced their massive plans with their fintech affiliate which is wildly popular from its Alipay and other financial services. Ant Financial has had a string of recent setbacks, with its USA expansion thwarted by the collapse of a deal for MoneyGram International Inc. while its Chinese business faces greater scrutiny from regulators and increased competition from Tencent Holdings Ltd.

The reunion is considered part of the groundwork for an expected initial public offering for Ant Financial.

Restaurant exploration and food delivery platform Zomato has raised United States dollars 200 million from Alibaba Group owned ANT Small and Micro Financial Services.

However, the cloud computing unit has yet to turn a profit, as Alibaba continues to spend aggressively to eke out solid market share and acquire new customers.

Eric Jing, chief executive officer of Ant Financial, said the deal "marks the next step" in the pair's collaboration to generate more strategic synergies. The move triggered controversies due to the objection of foreign shareholders Yahoo!

Alibaba on Thursday also reported one of its best quarterly results with 56% year-on-year revenue growth.

Hand-in-hand with the massive quarter figures and Ant Financial announcement, the e-commerce giant also declared that they are looking to raise their 2018 revenue growth forecasts and expectations from 49% to 53%, to a whopping 55% to 56%.

The company said profit jumped to 24.1 billion yuan ($3.7 billion) between October and December, compared to 17.9 billion yuan in the same quarter in 2016. The increase of smartphone and high-speed internet penetration has helped drive revenues in the core commerce business across China.