MATTER OF SURVIVAL
Alibaba began laying the groundwork for the restructuring a
few years ago, Zhang said.
As a result of the restructuring, each business unit can
pursue independent fundraisings and IPOs when they're ready, Xu
said, when asked about the timeline for the listings. The
changes will come into effect immediately.
"We believe the market is the litmus test so each company
can pursue financing and IPO as and when they are ready," said
Xu.
Alibaba, however, will decide whether the group wants to
keep strategic control of each unit after they go public.
Meanwhile, the group is also planning to continue to
monetise non-strategic assets in its portfolio to optimise its
capital structure, said Xu.
Alibaba's major rival Tencent has in the past year divested
from a number of portfolio companies including selling a $3
billion stake in SEA , transferring $16.4 billion worth of
JD.COM shares and $20 billion worth of Meituan shares to shareholders.
For its part, Alibaba has made or announced 18 divestments
since 2020, Refinitiv data showed.
Alibaba's reorganisation will not change its share
repurchase plan, Xu added on the call. Alibaba implemented a $6
billion share buyback programme in 2018, which had expanded to
$40 billion by late 2022.
Qi Wang, CEO of China-focused asset manager MegaTrust
Investment, said the sector's strategic move to reorganise was
about survival.
"These internet firms are not going to just sit there and
let regulation erode away their growth and profits," Wang said.
"Companies including Tencent, Alibaba, JD, Didi and ByteDance
have been making bottom-up changes to mitigate the regulatory
risk, cost cutting (layoffs), improving operating efficiency,
divesting non-core businesses."
Alibaba, once valued at more than $800 billion, has seen its
market valuation decline to $260 billion since Beijing started
the crackdown on its sprawling tech sector in late 2020.
Some analysts say Alibaba is currently undervalued as a
standalone conglomerate and that a breakup would allow investors
to value each business division independently.
The restructuring could also better protect Alibaba
shareholders from regulatory pressures, as penalties levied on
one division in theory would not affect the operations of
another.
Ratings agencies S&P and Moody's said this week Alibaba's
restructuring was credit positive.
However, S&P said it was not yet known how existing
resources would be divvied up or how the group would support
businesses with significant cash needs.
(Reporting by Josh Horwitz in Shanghai, Julie Zhu and Kane Wu
in Hong Kong; Writing by Sumeet Chatterjee; Editing by Sam
Holmes)
(Updates share price)
By Josh Horwitz, Kane Wu and Julie Zhu
SHANGHAI/HONG KONG, March 30 (Reuters) - Alibaba Group said on Thursday it will look to monetise non-core
assets and consider giving up control of some businesses, as the
Chinese tech conglomerate reinvents itself after a regulatory
crackdown that wiped 70% off its shares.
Group CEO Daniel Zhang said the company's breakup into
separate businesses will allow its units to become more agile
and eventually launch their own initial public offerings (IPO).
His comments come two days after Alibaba announced the
largest restructuring in the company's history, which will see
it change into a holding company structure with six business
units, each with their own boards and CEOs.
"Alibaba will be more of the nature of an asset and capital
operator than a business operator, in relation to the business
group companies," Zhang told investors on a conference call on
Thursday.
On the same call, Alibaba CFO Toby Xu said the group would
"continue to evaluate the strategic importance of these
companies" and "decide whether or not to continue to retain
control".
Alibaba's indication that it could divest from assets and
sell control of business units after they go public comes more
than two years after Beijing launched a sweeping crackdown on
its tech giants, targeting monopolistic practices, data security
protection and other issues.
While the new business units will have their own CEOs and
boards, Alibaba will retain seats on those boards in the
short-term, Zhang added.
The group's Hong Kong-listed shares opened 2.7% higher after
the investor call and following a 12% jump on Wednesday. Gains
narrowed to 2.0% by afternoon trade.
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