Alibaba to decide on control over new business units after IPOs By Reuters

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© Reuters. Trader works at the post where Alibaba is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 28, 2023. REUTERS/Brendan McDermid

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SHANGHAI/HONG KONG (Reuters) -Alibaba Group’s breakup into separate companies will allow its business units to become more agile and eventually list on their own, the tech conglomerate’s chief executive Daniel Zhang said on Thursday.

Zhang’s comments come two days after Alibaba (NYSE:) announced its largest restructuring in the company’s history, which will see it change into a holding company structure with six business units, each with their own boards and CEOs.

“Alibaba will be more of the nature of an asset and capital operator than a business operator, in relation to the business group companies,” he told investors on a conference call.

The business units will have their own CEOs and boards, though Alibaba will retain seats on those boards in the short-term, Zhang added.

Alibaba began laying the groundwork for the restructuring a few years ago, Zhang told investors during a conference call, adding the business units could pursue public listings on their own in the future.

After these units go public, Alibaba “will continue to evaluate the strategic importance of these companies” and “will decide whether or not to continue to retain control,” Alibaba CFO Toby Xu said on the call.

The changes will go into effect immediately.

As a result of the restructuring, each business unit can pursue independent fundraisings and IPOs when they’re ready, Xu said, when asked about the timeline for the listings.

“We believe the market is the litmus test so each company can pursue financing and IPO as and when they are ready,” said Xu.

Alibaba, however, will decide whether the group wants to keep strategic control of each unit after they go public, Xu said.

Meanwhile, the group is also planning to continue to monetise non strategic assets in their portfolio to optimize its capital structure, said Xu.

Some analysts say Alibaba is currently undervalued as a standalone conglomerate and a breakup would allow investors to value each business division independently.

The restructuring could also better protect Alibaba shareholders from regulatory pressures, as penalties levied on one division in theory would not affect the operations of another, analysts says.