Billionaire Jack Ma’s Ant Group filed for an initial public offering in Hong Kong and Shanghai to bankroll its expansion in financial services and bolster its lead as China’s largest online payments platform.
The Hangzhou-based company will issue no less than 10% in new shares of its total capital, according to its filing with the Shanghai exchange. Ant generated 72.5 billion yuan ($10.5 billion) in revenue in the first half, after full-year sales of 120.6 billion yuan in 2019, it said. The firm posted a profit of 21.2 billion yuan in the first half.
The crown jewel of the sprawling Alibaba empire, Ant has been accelerating its evolution into an online mall for everything from loans and travel services to food delivery, in a bid to win back shoppers lost to Tencent Holdings Ltd. With data from a billion users of its Alipay app at its back, Ant is pushing broadly into financial services, delivering technology such as artificial intelligence, robo investing and lending platforms.
The simultaneous listing could mark one of the biggest debuts in years, and even top Saudi Aramco’s record $29 billion IPO, a person familiar has said. The firm is targeting a valuation of about $225 billion, based on an IPO of about $30 billion if markets are favorable, people familiar with the matter have said.
The company will use the proceeds to expand cross-border payments and enhance its research and development capabilities, according to the filing, which didn’t provide a share price range or the amount it intends to raise in the IPO.
Unlike Chinese tech giants such as Alibaba Group Holding Ltd., Ant decided against listing in the U.S. at a time of increased scrutiny by the Trump administration of Chinese companies and warnings to U.S. endowment funds to offload their stakes in U.S.-listed Chinese businesses. Ant’s Shanghai listing marks a victory for the city’s exchange, and is part of an effort by China to establish its own capital markets as tensions with the U.S. escalate.
Alibaba is Ant’s largest shareholder, with a 33% stake. Hangzhou Junao, an entity that is owned by key Ant and Alibaba executives, owns 20.66%, while Hangzhou Junhan, which holds shares on behalf of Ant employees, owns a 29.86% stake.
Ant picked China International Capital Corp., Citigroup Inc., JPMorgan Chase & Co. and Morgan Stanley for its Hong Kong offering. Credit Suisse was hired as a joint global coordinator for the Hong Kong deal, according to people familiar. Representatives for Ant and Credit Suisse declined to comment.
CICC and CSC Financial Co. will lead the Shanghai portion. The company said it would raise 48 billion yuan in Shanghai as a placeholder, but companies typically exceed that indication in their offerings.
The preliminary IPO filing shed some light on Ant’s reach. Alipay’s total transaction volume reached 118 trillion yuan in the 12 months ended in June. The app had more than 1 billion users and 711 million monthly active users. More than 80 million merchants used Alipay to conduct business and Ant partnered with more than 2,000 financial institutions.
The company is also seeing a shift in its revenue structure, generating a greater contribution from technology services fees. The contribution from digital payments and merchants services fell 7.1 percentage points to 35.9% in the first half from the end of last year.
Its digital finance technology platform, which includes services credit, investment and insurance tech operating under the brands including Huabei, Jiebei and Yu’E Bao, accounted for 63.4% of revenue in the first half, up from 56.2% at the end of 2019.
The sale offers a potential windfall for a raft of U.S. private equity firms, including Silver Lake Management LLC, Warburg Pincus LLC and Carlyle Group Inc., which all invested at least $500 million in the firm’s latest 2018 funding round, people familiar with the matter have said. Credit Suisse Group AG also put in $100 million.
Ant’s IPO helps Hong Kong Exchanges & Clearing Ltd., which is seeing a renaissance of tech listings after it relaxed rules in the wake of losing China’s biggest tech firms — including Alibaba — to New York. Alibaba returned with a $13 billion secondary listing last year in Hong Kong.
Like Alibaba, Ant has hit the brakes on its U.S. expansion as political and trade tensions between America and China have escalated. Ma said in 2018 that his promise to create 1 million U.S. jobs was impossible to fulfill because of the trade tensions.
Instead, Ant has focused it offshore ambitions on building its presence in the rest of Asia, working with nine payment startups including the owners of Paytm in India and GCash in the Philippines.
Domestically, it’s expanding into consumer and technology services. Its technology solutions include services in cloud computing, artificial intelligence, blockchain and risk control. Ant aims to assist banks to dole out loans to consumers, and partner with brands to attract and manage customers.