Ant Group strikes deal with Chinese regulators over restructuring

By Our Correspondent

February 04, 2021

Beijing: Jack Ma’s Ant Group has reached a deal with Chinese regulators to restructure its business after they raised issues that halted its $37 billion initial public offering last year, according to several people familiar with the situation.

The proposed restructuring will involve Ant placing all of its major businesses, including its technology units, inside a financial holding company to comply with a new regime implemented by the People’s Bank of China in November.

The change, which is likely to be announced before the Chinese new year holiday begins on February 11, according to two of the people familiar with the process, will leave China’s largest mobile payments company subject to stricter capital requirements, making it more like a bank than a tech company.

Chinese regulators suspended Ant’s blockbuster Hong Kong and Shanghai IPO in November, about a week after Ma, Ant’s controlling shareholder, gave an ill-timed speech criticising China’s state-owned banks and regulators.

A person close to the company, who declined to be named, said it would take several months to complete the overhaul. “Business will definitely be impacted,” he added. “The actual impact will depend on how strictly we follow the new online lending rule.”

Another person close to the situation said he did not expect regulators to sign off so quickly after Ant submitted its restructuring plan.

Ant declined to comment on the potential restructuring.

The company’s Alipay app has more than 700 million monthly users who use it to swipe to pay, take out loans, insurance and manage their money. Alibaba’s results on Tuesday showed Ant remained wildly profitable in the third quarter of last year, earning an estimated Rmb14.5 billion in profit, before its listing was suspended.

Ant reported a net profit of Rmb21.9 billion in the first half of 2020.

Beijing had flagged its intention to require companies such as Ant to establish financial holding companies in September with the announcement of new regulations, a year after draft rules for such companies were made public.Ant is likely to need to raise capital to satisfy the PBoC rules for financial holding companies, which, along with requirements on capital adequacy, risk control and governance, make the holding vehicles more akin to banks than tech companies.