Alibaba Group Holding Ltd. plans to split its $220 billion empire into six main units that will individually raise funds and explore initial public offerings, the biggest overhaul of China’s e-commerce leader since its inception more than two decades ago.
(Bloomberg) — Alibaba Group Holding Ltd. plans to split its $220 billion empire into six main units that will individually raise funds and explore initial public offerings, the biggest overhaul of China’s e-commerce leader since its inception more than two decades ago.
The move frees up the Chinese company’s main divisions from e-commerce and media to the cloud to operate with far more autonomy, laying the foundation for future spinoffs and market debuts. Its shares climbed more than 4% in pre-market trading in New York.
The shift to a holding company structure is rare for major Chinese tech companies. It marks a departure from the internet company’s traditional preference for keeping most of its operations under one roof, running everything from supermarkets to datacenters under the main Alibaba umbrella. It’s also a strong signal that Alibaba is ready to tap investors and public markets, after the Xi Jinping administration’s clampdown on internet spheres wiped out more than $500 billion of its value.
“The news follows Beijing’s vow to support private sector. If China wants to achieve its 5% GDP growth target, they need to support companies like Alibaba,” said Steven Leung, UOB Kay Hian executive director.
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Alibaba’s announcement Tuesday coincided with the return of its billionaire co-founder Jack Ma to China after more than a year abroad.
Group Chief Executive Officer Daniel Zhang will head up the cloud intelligence division, a nod to the growing role that AI will play in the e-commerce leader’s portfolio in the long run.
Former international retail chief Jiang Fan will head up the digital business unit, while longtime executive Trudy Dai takes up the main Taobao Tmall online shopping division. Its other divisions include local services such as meal delivery, the Cainiao logistics group and digital media and entertainment.
Despite the creation of a half-dozen business lines, Alibaba on Tuesday reaffirmed the cost-cutting it had pledged to shore up the bottom line. That was a conservative shift for a tech conglomerate that once spent aggressively to dominate swaths of the economy, reflecting the dissipation of growth since Xi’s crackdown ensued in 2020.
Beijing has cracked down on the country’s tech giants over the last two years, forcing fundamental changes in the business models of companies including Alibaba. The e-commerce pioneer is also navigating increasingly tough competition from arch-rival JD.com Inc. as well as up-and-comers such as PDD Holdings Inc. and ByteDance Ltd.
“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” Zhang said in a statement. “The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready.”
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