In a restructuring ahead of its expected initial public offering, Alibaba Group Holding Ltd. is selling its small-business lending entity to the company that controls payments affiliate Alipay, the Financial Times reported Wednesday.
The Chinese e-commerce giant will sell the loan business to Small and Micro Financial Services Co. for US$518 million in cash and annual fees for seven years, it said in a US regulatory filing.
Small and Micro Financial Services already owns Alipay, a PayPal-like service that is used by shoppers on Alibaba’s websites.
The sale means the financial services assets will be owned by Chinese nationals instead of the global investors that may buy shares in the IPO.
It also takes financial and regulatory risk relating to the operations off Alibaba’s balance sheet, while increasing the pool of profits the company can generate from them, the filing shows.
Alibaba will now receive 37.5 percent of pre-tax income from Small and Micro Financial, compared with the 49.9 percent it was receiving from just Alipay before, according to the filing.
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