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[HONG KONG] Alibaba Group Holding Ltd's finance affiliate, which runs China's biggest e-commerce payments business, is planning an initial public offering next year, according to people familiar with the matter.
Zhejiang Ant Small & Micro Financial Services Group Co has an estimated value of about US$50 billion, said the people, who asked not to be identified because the discussions are private. Ant Financial is weighing a private placement before going public, and the details of the planned fundraising aren't finalized, the people said.
China's National Social Security Fund has been invited to invest in Ant Financial, another person familiar with the matter said. The US$50 billion valuation is about twice the minimum threshold required for an Ant Financial IPO, according to Alibaba's prospectus before its record share sale in September.
Alibaba Chairman Jack Ma has controlled Ant Financial, including the Alipay payments business, since spinning off the finance operations into a new company in 2011, citing foreign ownership restrictions. Prior to Alibaba's own IPO in September, the companies struck a new deal that entitled the e-commerce operator to a share of Ant Financial's earnings as Mr Ma moves the unit into new businesses, including money market funds.
Rachel Chan, a Hong Kong-based spokeswoman for Alibaba, declined to comment on behalf of both Alibaba and Ant Financial. The National Social Security Fund didn't respond to a phone message seeking comment.
September's Alibaba IPO raised a record US$25 billion, and the stock has surged 32 per cent since then. That helped make Mr Ma, who holds a 7.8 per cent stake in Alibaba, China's second-richest man with a net worth of US$26.3 billion, according to the Bloomberg Billionaires Index.
Mr Ma controls the voting rights to Ant Financial, though his holding will be reduced to a percentage not exceeding his Alibaba stake, according to the prospectus.
Ant Financial hasn't hired investment banks, one of the people said. The company is planning an A-share sale in China while not ruling out a dual listing, another person familiar said.
Under the terms of last year's revised agreement, Alibaba is entitled to a payment of at least US$9.4 billion if Alipay or its parent hold an IPO. Alibaba also gets the perpetual right to 37.5 per cent of the finance arm's pretax earnings and can buy a stake of about one-third if regulators approve.
Money Markets Employees, including Mr Ma, would own the shares in Ant Financial not held by new investors and Alibaba, amounting to about 40 per cent, the company said in October.
The spinoff of Alipay was a point of contention between Mr Ma and key shareholder Yahoo! Inc, which said it wasn't informed of the sale at the time, and led to the earlier 2011 agreement on compensation.
Since then, the business has expanded into money markets and controls more than 579 billion yuan (US$93 billion) in a fund called Yu'E Bao, according to the company's website.
Alipay, which is similar to Paypal, has more than 800 million registered users. Its mobile application has 190 million active users and handles 45 million transactions a day, the company said in October.