Wed, Dec 30, 2020 page10

• Ant Group mulling a new holding company: sources

  • Bloomberg
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  Founder Jack Ma’s (馬雲) Ant Group Co (螞蟻集團) is planning to fold its financial operations into a holding company that could be regulated more like a bank, people familiar with the matter said, potentially crippling the growth of its most profitable units.

  The fintech company is planning to move any unit that would require a financial license into the holding company, pending regulatory approval, said the people, who asked not be named because the matter is private.

  The plans are still under discussion and subject to change, the people said.

  

  Ant Group Co founder Jack Ma gives a speech at Viva Tech in Paris on May 16 last year.

  Photo: Reuters

  Ant Group declined to comment.

  The operations that Ant Group is looking to fold into the holding company include wealth management services, consumer lending, insurance, payments and MYbank, an online lender in which Ant Group is the largest shareholder, the people said.

  Under the financial holding company structure, Ant Group’s businesses would likely be subject to more capital restrictions, potentially curbing its ability to lend more and expand at the pace of the past few years.

  The proposals suggest that Ant Group would still be able operate in financial services beyond its payments business, quelling investor concern about how to interpret the Chinese central bank’s message on Sunday, when it asked Ant Group to return to its roots as a payments provider.

  “This means China is still trying to encourage domestic consumption and they need platforms like Ant to help with consumer loans,” UOB Kay Hian Holdings Ltd (大華繼顯控股) Shanghai-based analyst Wang Zhen said. “The key is that consumer lending shouldn’t be over-leveraged.”

  Chinese regulators also told Ant Group to devise a plan to overhaul its business, the latest in a series of steps to rein in Ma’s online finance empire.

  While it stopped short of directly asking for a breakup of the company, the central bank said that Ant Group needed to “understand the necessity of overhauling its business” and come up with a timetable as soon as possible.

  “Its growth would slow a lot,” Bloomberg Intelligence Hong Kong-based analyst Francis Chan (陳永富) said.

  The valuation of the nonpayment businesses, including wealth management and consumer lending, could be slashed by as much as 75 percent, Chan said.

  Ant Group last month was poised for an initial public offering (IPO) that would have valued it at more than US$300 billion before regulators intervened.

  Ant Group held US$11 billion of cash and cash equivalents as of June, according to its IPO filing.

  Under rules that took effect last month, companies that control at least two cross-sector financial institutions are required to hold a financial holding license.

  Rules on how financial holding companies could be regulated are still under deliberation.

  Chan estimated that Ant Group needs to inject at least 70 billion yuan (US$10.7 billion) of new capital just for its credit-lending business.

  That calculation is based on draft regulations that would require Ant Group to jointly fund 30 percent of its loans, with a maximum asset leverage of five times.

  Ant Group is planning to leave its digital lifestyle business — the services that link users with food deliveries, on-demand neighborhood services and hotel bookings — out of the financial holding company, one of the people said.

  Ant Group would still be the parent of all those operations, the person added.

  Ant Group is not working on a proposal to break up the company at this time, although it is seeking more guidance from regulators on what structure would be acceptable and might change its plans based on that feedback, that person said.

  Ant’s valuation could fall to below US$153 billion, similar to where it stood two years ago after a fundraising round, Chan said.
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