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Jack Ma's Ant Financial Nearly Doubles Profits Amid Deal Push

  • China’s largest online finance firm said to plan IPO
  • Company may be valued at $74.5 billion according to CLSA

Ant Financial, the financial affiliate of Alibaba Group Holding Ltd., almost doubled earnings in fiscal 2017 as it expanded its footprint in wealth management and overseas markets.

The company controlled by Alibaba’s billionaire co-founder Jack Ma racked up an 86 percent jump in pretax profit to 5.56 billion yuan ($814 million) in the year ended March, according to Bloomberg’s calculations from an Alibaba filing. Ant Financial declined to comment in an email.

Since starting as Alipay in 2004, Ant Financial has grown into an online giant that controls more than half of China’s $5.5 trillion mobile payments market. The company expanded into money-market funds and is now ramping up assets overseas via deals in India, Thailand and the U.S. The profit surge could shore up investor confidence for an initial public offering, which is said to be planned for as soon as next year.

Alibaba is entitled to 37.5 percent of Ant Financial’s pretax earnings based on a deal the two struck in the run-up to Alibaba’s 2014 IPO. Ant Financial paid the e-commerce giant about 2.09 billion yuan in royalty and technology fees in fiscal 2017, up about 86 percent from the previous year, according to the Alibaba filing.

Officially named Zhejiang Ant Small & Micro Financial Services Group Co., the company is one of Ma’s most closely watched assets, and tightly linked to Alibaba, China’s biggest e-commerce operator. Alibaba is entitled to about one-third of Ant Financial upon its market debut -- with regulatory approval -- a potential boost for Alibaba’s shareholders.

An alternative option would be for Alibaba to receive a one-time payment equivalent to 37.5 percent of the value of Ant Financial as determined prior to its IPO, which could amount to $28 billion: CLSA analyst Elinor Leung estimated in September that Ant was worth $74.5 billion.

The agreement was brokered after a dispute between Alibaba and Yahoo! Inc. in 2011. At the time, Alibaba transferred Alipay into an entity that was controlled by Ma, citing concerns that it wouldn’t be permitted to conduct business in China while it had foreign ownership.

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