Alibaba restructures Alipay's parent, Jack Ma's share reduced

BEIJING (Reuters) - The online payment affiliate of China’s biggest e-commerce company Alibaba Group Ltd will be restructured to attract new strategic investors, in a move that will reduce the shareholding of Alibaba’s founder Jack Ma in the affiliate.

A worker walks past a logo of Alibaba Group at its headquarters on the outskirts of Hangzhou, Zhejiang province, August 24, 2013. REUTERS/China Daily

Zhejiang Alibaba E-Commerce Co Ltd will be restructured as a new company in which 60 percent of its shares will be offered to new strategic investors, Lucy Peng, head of the restructured entity, said in a letter published on its official Weibo microblog account on Friday.

Ma will see his shareholding reduced from 80 percent to about 7 percent in the new company, or no greater than his shareholding in Alibaba Group, according to the letter.

The restructured company, to be known as Alibaba Small and Micro Financial Services Group, will hold Zhejiang Alibaba’s 100 percent stake in unit Alipay, as well as its shareholding in Alibaba’s micro-finance unit, Zhongan Insurance, and Tianhong Asset Management Co.

Alipay is China’s biggest third-party payment platform, providing payment solutions to 460,000 merchants, and with 800 million registered accounts.

The remaining 40 percent in the new company will be offered to nearly 24,000 employees at Alibaba Group and Zhejiang Alibaba, said Peng, former chief executive of Alipay. That includes the share held by Ma.

The announcement on Friday will have no impact on existing agreements with Alibaba and the group’s shareholders SoftBank Corp and Yahoo! Inc, Alibaba spokesman John Spelich said.

In 2011, Ma sparked a public dispute with Alibaba Group’s biggest outside investors when he separated Alipay from Alibaba. Ma said at the time that new Chinese government regulations on third-party payment services required the changes.

The companies later settled, in a deal that guaranteed Alibaba 49.9 percent of Alipay’s earnings prior to an initial public offering, and as much as $6 billion if Alipay sells shares to the public.

“Today’s announcement underscores that employees of both Alibaba Group Holdings and Alibaba Small and Micro Financial Services Group are being incentivized to work hard to achieve success for the company,” Spelich said.

Alibaba Group, through Alipay, is introducing a variety of financial services to complement its e-commerce businesses. Besides Alipay, which provides users with an online payment system, the Hangzhou-based company has also started fund and insurance sales, as well as small loan finance.

In June, Alipay launched Yu E Bao, a fund management platform, allowing Alibaba customers to directly invest cash from their Alipay account into a money market fund managed by Tianhong Asset Management Co.

The Zenglibao fund is the most successful fundraising by any mutual fund in China this year, with managed assets reaching 55.7 billion yuan ($9.14 billion) at the end of September.

Alibaba also received approval this week from China’s securities regulators to act as a third party for the online sale of fund products on its Amazon-like Taobao.

Reporting by Matthew Miller; Additional reporting by Beijing newsroom; Editing by Ryan Woo