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.
CAUTIOUS RECOVERY: While the manufacturing sector returned to growth amid the US-China trade truce, firms remain wary as uncertainty clouds the outlook, the CIER said The local manufacturing sector returned to expansion last month, as the official purchasing managers’ index (PMI) rose 2.1 points to 51.0, driven by a temporary easing in US-China trade tensions, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The PMI gauges the health of the manufacturing industry, with readings above 50 indicating expansion and those below 50 signaling contraction. “Firms are not as pessimistic as they were in April, but they remain far from optimistic,” CIER president Lien Hsien-ming (連賢明) said at a news conference. The full impact of US tariff decisions is unlikely to become clear until later this month
GROWING CONCERN: Some senior Trump administration officials opposed the UAE expansion over fears that another TSMC project could jeopardize its US investment Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is evaluating building an advanced production facility in the United Arab Emirates (UAE) and has discussed the possibility with officials in US President Donald Trump’s administration, people familiar with the matter said, in a potentially major bet on the Middle East that would only come to fruition with Washington’s approval. The company has had multiple meetings in the past few months with US Special Envoy to the Middle East Steve Witkoff and officials from MGX, an influential investment vehicle overseen by the UAE president’s brother, the people said. The conversations are a continuation of talks that
CHIP DUTIES: TSMC said it voiced its concerns to Washington about tariffs, telling the US commerce department that it wants ‘fair treatment’ to protect its competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reiterated robust business prospects for this year as strong artificial intelligence (AI) chip demand from Nvidia Corp and other customers would absorb the impacts of US tariffs. “The impact of tariffs would be indirect, as the custom tax is the importers’ responsibility, not the exporters,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) said at the chipmaker’s annual shareholders’ meeting in Hsinchu City. TSMC’s business could be affected if people become reluctant to buy electronics due to inflated prices, Wei said. In addition, the chipmaker has voiced its concern to the US Department of Commerce
STILL LOADED: Last year’s richest person, Quanta Computer Inc chairman Barry Lam, dropped to second place despite an 8 percent increase in his wealth to US$12.6 billion Staff writer, with CNA Daniel Tsai (蔡明忠) and Richard Tsai (蔡明興), the brothers who run Fubon Group (富邦集團), topped the Forbes list of Taiwan’s 50 richest people this year, released on Wednesday in New York. The magazine said that a stronger New Taiwan dollar pushed the combined wealth of Taiwan’s 50 richest people up 13 percent, from US$174 billion to US$197 billion, with 36 of the people on the list seeing their wealth increase. That came as Taiwan’s economy grew 4.6 percent last year, its fastest pace in three years, driven by the strong performance of the semiconductor industry, the magazine said. The Tsai
RSS