Alibaba Group Holding Ltd (BABA.N), China’s biggest e-commerce company, has acquired 33 percent of its payments affiliate Ant Financial, which houses the Alipay payment processing system and other financial services.
The deal, which ends a profit-sharing arrangement that goes back to 2014 and was worth more than $330 million last year, clears the way for an initial public offering of China’s most valuable financial technology company. It also boosts Ant’s profile ahead of a widely expected initial public offering (IPO), though the company has neither publicly set a timetable nor chosen a stock exchange.
Alibaba will not pay any cash to acquire one-third of China’s biggest online payment platform that pays it 37.5 percent of its profit, plus 2.5 percent of its outstanding loans each year. Instead, Alibaba will swap certain intellectual property rights to fund its acquisition of the new stake in Ant Financial, which is currently valued at roughly $150 billion.
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Ant Financial loses MoneyGram battle
Ant Financial spun off from Alibaba Group Holding Ltd before its 2014 listing, currently provides its financial services to nearly 1.2 billion users in China and beyond. Alipay makes up much of the business as the payment platform enables users to hail taxis, book hotels, buy movie tickets, and more, from within its app. It also gets a commission of around 0.18 percent on every dollar it processes on Alibaba’s marketplaces.
Last year, Ant Financial lost its battle to acquire US money-transfer company MoneyGram though it raised the value of its bid to $1.2 billion, up 36 percent of its original $880 million offer.
According to media reports, its rival Euronet openly lobbied US lawmakers, saying that Ant’s proposal created a national security risk although MoneyGram would remain headquartered in Dallas and continue to operate under its existing brand. Several members of Congress criticized the deal with the affiliate of Alibaba, saying that the Chinese government has nearly 15 percent stake in Ant.