Alibaba Group Holding Ltd (阿里巴巴) plans to spin off some of its sprawling e-commerce and finance empire as independent businesses to make them more flexible and maximize their value, its top executives said yesterday, as the company emerges from regulatory crackdowns that rattled Chinese tech industries.
Alibaba chief executive officer Daniel Zhang (張勇) outlined details of a plan announced earlier this week to split Alibaba into six main groups as a prelude toward initial public offerings (IPO) of some of its companies.
The restructuring marks a new stage in Alibaba’s growth after a series of setbacks as regulators tightened oversight of the industry.
Photo: Reuters
Alibaba, headquartered in Hangzhou, China, would be “in the nature of a holding company that is the controlling shareholder of the business group companies,” Zhang said in a conference call.
Alibaba chief financial officer Toby Xu (徐宏) said that the company would continue to evaluate the strategic importance of group companies after they go public and decide whether to retain control.
He declined to say when they might go public.
“We believe the market is the best litmus test, so each business group company can pursue independent fundraising and IPOs as and when they are ready,” Xu said.
Alibaba’s restructuring plan and the recent return of founder Jack Ma (馬雲) to China after months abroad appear to mark a turnaround after several hard years.
Chinese regulators singled out Alibaba for scrutiny in a crackdown on technology and Internet companies, putting the brakes on a planned IPO in 2020 of Alibaba’s financial affiliate Ant Group Co (螞蟻集團).
Alibaba is to split into its Cloud Intelligence Group, Taobao Tmall Business Group, Local Services Group, Global Digital Business Group, Cainiao Smart Logistics and Digital Media and Entertainment Group. Each group apart from Taobao Tmall (淘寶天貓) could potentially seek an IPO.
Taobao Tmall would remain wholly owned by Alibaba Group.
Zhang said he expected the shake up to be challenging, but would also “allow all of our businesses to become more agile, enhance their decisionmaking and enable faster responses to market changes.”
Among other things, the restructuring plan might allay antitrust concerns, with Zhang saying that each Alibaba business unit would be empowered to make its own decisions and raise capital independently.
“The looser connections between the business units is in line with the regulatory stance of encouraging competition,” Moody’s Investor Service said in a note.
Alibaba’s restructure — the first such major overhaul in the Chinese technology industry — could also serve as an example for similar companies such as online games company Tencent Holdings Ltd (騰訊) to follow suit.
“We think that Alibaba’s new organizational structure could be used by Chinese regulators as a template for other Chinese big tech firms,” CreditSights said in a report.
Geo Securities Ltd (智易東方證券) CEO Francis Lun (藺常念) said that in the short term Alibaba’s move would likely allow the group to raise more capital.
However, it might be more difficult for the company to stay competitive in mergers and acquisitions, Lun said.
“When you split into six business units, you’d just be a lightweight competing against the heavyweights such as Apple, Amazon and Alphabet,” he said.
Only Alibaba’s e-commerce and cloud units were profitable, and in the long-term, the other units might not succeed, he added.
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