Alibaba will acquire a 33% stake of new shares in its finance affiliate Ant Financial via a Chinese subsidiary, The Paper reported.
The prospectus issued by Alibaba in August 2014 disclosed this potential trading arrangement. According to that agreement, Ant Financial would pay Alibaba fees for intellectual property and technical services every year, which is equivalent to about 37.5% of Ant Financial’s pre-tax profit.
The fee payments could be terminated if Alibaba acquires a 33% stake in Ant Financial, as the corresponding intellectual property will be transferred to the company.
An insider said compared to pre-tax profit sharing, Alibaba’s direct stake in Ant Financial will help the company build up a more stable ownership structure and better prepare it for going public.
According to the company’s 2016 annual report, Ant Financial has 23 shareholders, with Junhan Investment and Junao Investment holding the highest proportion of investment, 6.34 billion yuan and 5.12 billion yuan respectively.