Alibaba to buy 33% stake in Ant Financial

Alibaba announced an agreement to buy a 33 percent stake in Ant Financial, operator of the Chinese payment system Alipay, which was spun off from Alibaba in 2011. The no-cash deal is in exchange for Ant stopping royalty payments to Alibaba, a move that could pave the way for Ant Financial to seek its own stock market listing. 

The deal will see Ant Financial issue new shares to Alibaba in exchange for certain intellectual property rights owned by Alibaba exclusively related to Ant Financial. The Alipay business was originally developed by Alibaba to facilitate payments on its e-commerce platforms, and Ant Financial pays Alibaba 37.5 percent of its pretax profits as royalty and licensing fees. The company was later spun off by Alibaba to bring in new investors, in anticipation of an eventual IPO. 

Alibaba said the deal will cement its long-term relationship with Ant Financial, while also giving it exposure to growth in the fintech sector. A committee of non-executive directors at Alibaba reviewed and approved the transaction. 

During the December quarter, Ant Financial continued to deliver rapid revenue growth and executed an aggressive user growth plan that resulted in substantial new user additions and increased user engagement, Alibaba said. As a result of the initiatives, Alipay Wallet’s daily active users more than doubled in December on a year-over-year basis.