Alibaba Considers Yielding Control of Some Businesses in Overhaul

The logo of Chinese technology firm Alibaba is seen at its office in Beijing, Tuesday, Aug. 10, 2021. (AP Photo/Mark Schiefelbein, File)
The logo of Chinese technology firm Alibaba is seen at its office in Beijing, Tuesday, Aug. 10, 2021. (AP Photo/Mark Schiefelbein, File)
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Alibaba Considers Yielding Control of Some Businesses in Overhaul

The logo of Chinese technology firm Alibaba is seen at its office in Beijing, Tuesday, Aug. 10, 2021. (AP Photo/Mark Schiefelbein, File)
The logo of Chinese technology firm Alibaba is seen at its office in Beijing, Tuesday, Aug. 10, 2021. (AP Photo/Mark Schiefelbein, File)

Alibaba Group said on Thursday it will look to monetize 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), Reuters said.

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.

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 monetize non-strategic assets in its portfolio to optimize 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 reorganization will not change its share repurchase plan, Xu added on the call. Alibaba implemented a $6 billion share buyback program 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 reorganize 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, and 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 divided up or how the group would support businesses with significant cash needs.



Lebanon Tourism Season Revives Economic Outlook

People are seen at the arrival lounge at Beirut International Airport, Lebanon. (Asharq Al-Awsat)
People are seen at the arrival lounge at Beirut International Airport, Lebanon. (Asharq Al-Awsat)
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Lebanon Tourism Season Revives Economic Outlook

People are seen at the arrival lounge at Beirut International Airport, Lebanon. (Asharq Al-Awsat)
People are seen at the arrival lounge at Beirut International Airport, Lebanon. (Asharq Al-Awsat)

The surge in visitors to Lebanon during Eid al-Adha and high demand for summer concert bookings are boosting hopes for a revival in tourism.

This sector is crucial for reigniting positive economic growth after about nine months of challenging conditions due to the Gaza war and subsequent border clashes between Hezbollah and Israel in southern Lebanon.

Contrary to earlier fears this month of possible Israeli strikes inside Lebanon, Ali Hamieh, caretaker Minister of Public Works and Transport, reported a daily average of 14,000 arrivals at Beirut’s Rafic Hariri International Airport, with numbers on the rise.

Jean Abboud, President of the Association of Travel and Tourism Agents, confirmed that despite initial concerns, booking rates have bounced back to 90-95% after Israeli threats of a mid-month strike. Most arrivals are Lebanese expatriates and foreign workers.

Before the summer season’s anticipated surge, Lebanon saw a 5.37% decrease in arrivals, with air traffic down by 9.34% and passenger numbers at Beirut International Airport dropping by 6.84% in the first five months of this year, totaling 2.29 million travelers compared to 2.46 million last year.

These declines were linked to the border clashes.

Lebanon’s tourism sector, generating over $5 billion annually in recent years, ranks as the country’s second most vital revenue stream after expatriate remittances, which officially approach $7 billion.

Together, they contribute more than half of Lebanon’s national income, which has dropped sharply from about $55 billion to under $22 billion due to the ongoing financial and currency crises that erupted five years ago.

Despite significant losses during peak tourism seasons like Christmas, Easter, and Eid al-Fitr, a report by Bank Audi indicated that Lebanon’s tourism revenues lost over $1 billion in the first six months of the Gaza conflict, driven by a 24% drop in tourist arrivals.

On average, tourists spend around $3,000 during their stay in Lebanon.