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Ant Financial turns to banks to revive IPO plans

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Via Financial Times

Ant Financial is working with banks to revive plans for an initial public offering, more than a year after China’s dominant mobile payments company delayed the process after regulatory worries and concerns over its profitability.

Ant, the sister company of the ecommerce giant Alibaba, was last valued at $150bn in a 2018 fundraising round and a listing, even of a small portion of its shares, would represent one of the biggest floats of an Asian company.

Credit Suisse is involved in the early stage preparations, according to two people familiar with the matter. China International Capital Corp is also involved in the work, one of the people said. Alibaba owns a small stake in CICC and has a long relationship with Credit Suisse.

Standalone financial information about Ant is limited but in the quarter ending last September the company, which offers everything from payments to consumer credit to one of the world’s largest money market funds, contributed $309m to Alibaba’s income.

In the quarter, Alibaba swapped its right to 37.5 per cent of Ant’s pre-tax profits for a 33 per cent equity stake after approval from regulators, clarifying Ant’s ownership structure and clearing a path for a potential IPO.

Hangzhou-based Ant is considering a dual listing for its shares in Hong Kong and mainland China, one of the people familiar with the situation said. A spokesperson for Ant Financial said: “We don’t have a plan nor a timetable for an IPO.” Both Credit Suisse and CICC declined to comment.

Lawyers and bankers have long pointed to a dual mainland and Hong Kong listing as the most likely outcome for the fintech company, which has faced a host of regulatory concerns in China over foreign ownership of financial firms and a more recent crackdown on risk in the financial sector.

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In November, Alibaba itself raised $12.9bn in a secondary listing in Hong Kong, advised by Credit Suisse and CICC. Alibaba’s share price has risen 18 per cent since then.

In 2011, Jack Ma transferred Alipay — as Ant was then called — out of Alibaba into an entity that he controlled, triggering a dispute with Yahoo and SoftBank, two of Alibaba’s largest shareholders at the time. Mr Ma said it was to comply with Chinese regulations prohibiting foreign ownership of financial businesses.

The regulatory headwinds have persisted. For several years, Ant executives have taken to calling it a “techfin” company instead of a “fintech” company to emphasise its technology business over its financial services offerings, according to a person familiar with the matter.

The eventual public listing will allow international investment firms such as Singapore’s GIC and Warburg Pincus, among many others, to cash out after investing in its 2018 fundraising round that took in $14bn in investor capital.

At the time the international companies bought into Ant through a wholly owned offshore subsidiary called Ant International. These holdings are designed to convert into shares once the company lists.

A dual listing in mainland China and Hong Kong would allow greater convenience to sell shares for both renminbi investors in Ant’s earlier funding rounds, as well as the dollar investors who invested in its latest funding round, said one lawyer in Hong Kong who asked not to be named.

Chinese companies have also traded at more favourable valuations in their home market as concerns over the regulatory outlook in Washington have added a risk discount to Chinese shares listed in the US.

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