Alibaba will determine control over new business units after the IPOs

SHANGHAI/HONG KONG, March 30 (Reuters) – The separation of Alibaba Group ( 9988.HK ) into separate companies will allow its business units to become more efficient and eventually list on their own, Technology Consortium Chief Executive Daniel Zhang said on Thursday.

Zhang’s comments came two days after Alibaba announced the biggest restructuring in the company’s history, which will see it shift to a holding company structure with six business units, each with its own board and CEO.

“Alibaba will be more in the nature of an asset and capital operator than a business operator in relation to business group companies,” he told investors on a conference call.

The business units will have their own CEOs and boards, though Alibaba will hold seats on those boards in the short term, Zhang added.

Alibaba, which began laying the groundwork for restructuring a few years ago, told investors on a conference call that its business units could pursue public listings on their own in the future.

After these units go public, Alibaba will “continue to evaluate the strategic importance of these companies” and “decide whether to continue the number or not,” Alibaba CFO Toby Xu said on the call.

The changes will take effect immediately.

Because of the restructuring, each business unit will be able to pursue independent fundraising and IPOs when they are ready, Xu said.

“We believe the market is a litmus test for each company to pursue financing and IPO when they are ready,” Xu said.

But Alibaba will decide whether it wants to take strategic control of each unit after the group goes public, Xu said.

Meanwhile, the group plans to continue monetizing non-strategic assets in its portfolio to optimize its capital structure, he said.

Some analysts say Alibaba is currently undervalued as a stand-alone conglomerate and that the separation will allow investors to understand each business unit independently.

Analysts say the structure could better protect Alibaba’s shareholders from regulatory pressures, as fines on one unit would theoretically not hurt another’s.

Reporting by Josh Horwitz in Shanghai, Julie Zhou and Ken Wu in Hong Kong; Writing by Sumeet Chatterjee; Editing by Sam Holmes

Our Standards: The Thomson Reuters Trust Principles.

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