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.



Saudi PIF Completes $7 bln Inaugural Murabaha Credit Facility

The Public Investment Fund (PIF) logo
The Public Investment Fund (PIF) logo
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Saudi PIF Completes $7 bln Inaugural Murabaha Credit Facility

The Public Investment Fund (PIF) logo
The Public Investment Fund (PIF) logo

Saudi Arabia's Public Investment Fund (PIF) completed on Monday a $7 billion inaugural murabaha credit facility.
In a statement, PIF said the credit facility is supported by a syndicate of 20 international and regional financial institutions.
PIF head of the Global Capital Finance Division and head of Investment Strategy and Economic Insights Division Fahad AlSaif said: “This inaugural murabaha credit facility demonstrates the flexibility and depth of PIF’s financing strategy and use of diversified funding sources, as we continue to drive transformative investments, globally and in Saudi Arabia”, the Saudi Press Agency reported on Monday.
This financing complements PIF’s successful sukuk issuances over the past two years, the statement added. It also underpins PIF’s strong financial position, as well as its best-practice approach to debt financing.
PIF is rated Aa3 by Moody’s with stable outlook and A+ by Fitch with stable outlook. PIF has four main sources of funding: capital injections from government, government asset transfers, retained earnings from investments, and loans and debt instruments.