Alibaba said to target global IPO roadshow in September

(China Daily) Updated: 2014-08-14 07:47

Company sells small-business lending arm

Alibaba said to target global IPO roadshow in September

Alibaba Group Holding Ltd is selling its small-business lending arm to the company that already controls payments affiliate Alipay, separating itself from the last of its major financial units ahead of an initial public offering expected next month.

The e-commerce giant will sell the loan business to Small and Micro Financial Services Co for $518 million in cash and annual fees for seven years, it said in a regulatory filing in the United States on Wednesday.

Small and Micro Financial Services already owns Alipay, which is used by shoppers on Alibaba's websites. The agreement also lifts a $6 billion cap, under certain conditions, on funds that Alibaba could receive if Alipay or its parent company goes public, the filing showed.

The sale means the financial-services assets will be owned by Chinese nationals instead of the global investors who may buy shares in the IPO. It also takes financial and regulatory risk relating to the operations off of Alibaba's balance sheet, while increasing the pool of profits the company can generate from them, the filing showed.

Alibaba will now receive 37.5 percent of pretax income from Small and Micro Financial, compared with 49.9 percent it was receiving from just Alipay before, according to the filing. Alibaba could acquire as much as a 33 percent stake in Small and Micro Financial Services if given Chinese regulatory approval, the filing showed.

More than 78 percent of purchases made on Alibaba's platforms last year were processed through Alipay, according to the prospectus. The lending unit provides financing for small and medium-sized businesses that sell products on Alibaba's marketplaces. Other units within the Small and Micro Financial group include consumer finance, asset management, financial-products distribution and insurance.

Alibaba sold Alipay to Small and Micro Financial, which is controlled by co-founder Jack Ma, in 2011 amid concerns it would not be permitted to conduct business in China while it had foreign ownership. That sale drew criticism from shareholder Yahoo Inc, which said it was not informed of the sale at the time.