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Alibaba’s arch rival JD.com spins out its financial services business

While Alibaba’s Ant Financial fintech affiliate is out doing deals to expand its global presence and raising a $3 billion war chest for further M&A, its chief rival in China has made a strategic deal of its own.

JD Finance, the financial services business belonging to Alibaba competitor JD.com, is going independent, according to a deal announced yesterday.

The business was started to house JD.com’s finance, banking and credit services much like Ant Financial. Last year, it raised $1 billion from external investors led by Sequoia and now JD.com is divesting its entire 68.6 percent stake for 14.3 billion RMB, or around $2.1 billion. The deal will see the e-commerce firm take 40 percent of JD Finance’s pre-taxi profits once its business once it has positive pre-tax income — but JD.com can swap that profit share into 40 percent equity in the future.

JD.com didn’t specify which third-party investors have acquired its current stake, but its CEO Richard Liu is confirmed as purchasing 4.3 percent of JD Finance as part of the divestment. Despite the size of his shareholding, Liu would retain a majority voting right for JD Finance.

Essentially the move hedges any risk that JD.com investors may feel around JD Finance, which was valued at $7.1 billion at the time of last year’s financing. The unit’s metrics are opaque, but yet it is/was part of the JD.com business, which is listed on the Nasdaq.

As for Ant Financial: the company raised $4.5 billion at a valuation of $60 billion last April. It is being tipped to go public this year or next year, with Hong Kong and China the two listing destinations that have been heavily speculation.

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