Ant Financial seeks $5bn in funding ahead of IPO
Ant Financial is set to raise around $5bn in a funding round expected to value the Alibaba payments affiliate at more than $100bn, according to people familiar with the matter. The move sets an early marker for its keenly anticipated initial public offering.
The boosted valuation is also handy for Alibaba, which last month announced plans to swap its current profit-sharing arrangement for a 33 per cent stake in Ant, setting the ball in motion to list the group.
The latest funding round may be launched as soon as this month, say people close to the process.
If the offering, first reported by Reuters, pulls in as much as anticipated — some suggest it may imply a valuation as high as $120bn, or twice the level achieved in its last fundraising nearly two years ago — Ant would become the world’s biggest unicorn ahead of ride-hailing Uber, which is valued at $68bn.
Ant is battling it out with Tencent, which competes with Alibaba across the tech landscape, to control China’s $15.5tn third-party mobile payments market, which trebled in size last year.
The market in China dwarfs that of the US and other developed markets, in part a results of China’s weak legacy banking system as people have leapfrogged to paying with a swipe of their phones rather than going via credit cards. iResearch, which tracks the market, forecasts it will grow to around $25tn this year.
While payments is not a hugely profitable business in itself, scraping off just basis points, it is an entry point into a broader suite of financial services including consumer loans, investment products and insurance. “Payments are the foundation for developing the financial services business,” noted one player.
Added Thomas Olsen, partner at Bain consultancy: ““The real value of this is the data.”
Others argue that the aggressive push to sign up players, both online and offline, is a costly bid to acquire share that is undermining profitability.
Ant has had a colourful history. Initially set up as a PayPal-style solution for customers to buy goods on its ecommerce service, it was controversially carved out into a separate entity in 2011.
Alibaba founder Jack Ma attributed the move to government rules requiring payment businesses to be held in wholly Chinese hands. Nevertheless the transfer of the valuable asset triggered a public spat with US-based Yahoo, which was a major shareholder in Alibaba at the time.
With the latest restructuring Alibaba swaps its current profit-sharing arrangement, under which Ant pays to Alibaba 37.5 per cent of its pre-tax profit, worth Rmb2.08bn ($330m) in Alibaba’s last financial year, in return for a clear one-third ownership in Ant.
Ant is likely to seek a dual listing, bankers say, with an IPO in either New York or Hong Kong accompanied by an offering in Shanghai to smooth the way with Beijing. The restructuring has yet to receive clearance from regulators in China.