Group CEO Daniel Zhang said the company's breakup into
separate businesses will allow its units to become more agile and eventually
list on their own.
His comments come two days after Alibaba announced its
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 percent
higher after the investor call and were still up 2% as of 0147 GMT.
Matter of survival
Alibaba began laying the groundwork for the restructuring a
few years ago, Zhang told investors during a conference call.
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, Xu said.
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.
Alibaba's reorganisation will not change its share
repurchase plan, Xu added on the call.
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 a crackdown on
its sprawling tech sector in late 2020.
Some analysts say Alibaba is currently undervalued as a
standalone conglomerate and 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. © Reuters
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