China's Ant explores ways for Jack Ma to exit as Beijing piles pressure - sources

City Coolxuan Co

19/04/2021 01:25

(Repeats item first carried on Saturday.)
    By Julie Zhu
    HONG KONG, April 17 (Reuters) - Ant Group is exploring
options for founder Jack Ma to divest his stake in the financial
technology giant and give up control, as meetings with Chinese
regulators signaled to the company that the move could help draw
a line under Beijing's scrutiny of its business, according to a
source familiar with regulators' thinking and two people with
close ties to the company. 
    Reuters is for the first time reporting details of the
latest round of meetings and the discussions about the future of
Ma's control of Ant, exercised through a complicated structure
of investment vehicles. The Wall Street Journal previously
reported that Ma had offered in a November meeting with
regulators to hand over parts of Ant to the Chinese government.
https://on.wsj.com/2QvkHbc
    Officials from the central bank, People's Bank of China
(PBOC), and financial regulator China Banking and Insurance
Regulatory Commission (CBIRC) held talks between January and
March with Ma and Ant separately, where the possibility of the
tycoon's exit from the company was discussed, according to
accounts provided by the source familiar with the regulators'
thinking and one of the sources with close ties to the company.
    Ant denied that a divestment of Ma's stake was ever under
consideration. "Divestment of Mr. Ma's stake in Ant Group has
never been the subject of discussions with anyone," an Ant
spokesman said in a statement.
    Reuters could not determine whether Ant and Ma would proceed
with a divestment option, and if so, which one. The company
hoped Ma's stake, which is worth billions of dollars, could be
sold to existing investors in Ant or its e-commerce affiliate
Alibaba Group Holding Ltd  BABA.N  without involving any
external entity, one of the sources with company ties said.
    But the second source also with company connections said
that during discussions with regulators, Ma was told that he
would not be allowed to sell his stake to any entity or
individual close to him, and would instead have to exit
completely. Another option would be to transfer his stake to a
Chinese investor affiliated with the state, the source said.
    Any move would need Beijing's approval, both sources with
knowledge of the company's thinking said. 
    The accounts provided by all the three sources are
consistent in terms of the timeline for how discussions have
evolved over the past few months. On the company side, one
source said Ma met regulators more than once before the Chinese
New Year, which was in early February. And the second source
said Ant started working on options for Ma's possible exit about
a couple of months ago. The source familiar with the regulators'
thinking said Ant had told officials during a meeting sometime
before mid-March that it was working on options. 
    The source familiar with the regulators' thinking has direct
knowledge of conversations between Ant and officials, while one
of the sources with company ties has been briefed on Ma's
interactions with regulators and Ant's plans. The other one has
direct knowledge of Ant's discussions about options. They
requested anonymity because of the sensitivity of the situation.
    The Ant spokesman did not provide any comments from Ma.
Alibaba referred questions to Ant. Jack Ma's office did not
respond to Reuters' request for comment made via Ant. The State
Council Information Office, PBOC, and CBIRC, also did not
respond to requests for comment.
    The high-stakes discussions come amid a revamp of Ant and a
broader regulatory clampdown on China's technology sector that
was set in motion after Ma's public criticism of regulators in a
speech in October last year.  
    Ma's exit could help clear the way for Ant to revive plans
to go public, which stalled after the tycoon's speech, both
sources proximate to the company said. Ant, which was about to
raise an estimated $37 billion in what would have been the
world's largest initial public offering, aborted plans the day
after Ma's Nov. 2 meeting with regulators.  urn:newsml:reuters.com:*:nL8N2HQ0O2
    
    'TOO BIG FOR THEIR BRITCHES'    
    Since then Beijing has unleashed a series of investigations
and new regulations that have not only reined in Ma's empire but
also swept across the country's technology sector, including
other high-profile, billionaire entrepreneurs.
    For Ma, 56, who also founded Alibaba and once commanded
cult-like reverence in China, the consequences have been
particularly severe. The tycoon completely withdrew from the
public eye for about three months and has continued to keep a
low profile after a brief January appearance.  urn:newsml:reuters.com:*:nL1N2JV09Y
    China's antitrust regulator fined Alibaba a record $2.75
billion on April 10 following an antimonopoly probe that found
it had abused its dominant market position for several years. A
couple of days later Ant was asked by the central bank to become
a financial holding company, bringing it under the ambit of
banking rules that it had managed to avoid so far and allowed it
to grow rapidly.   urn:newsml:reuters.com:*:nL1N2M3010  urn:newsml:reuters.com:*:nL1N2M50R0
    "China still likes to promote its technology firms as global
leaders just as long as they don't get too big for their
britches," said Andrew Collier, managing director of Orient
Capital Research.
    
    CONTROLLING STAKE
    Although Ma had previously stepped down from corporate
positions, he retains effective control over Ant and significant
influence over Alibaba.
    While he only owns a 10% stake in Ant, Ma exercises control
over the company through related entities, according to Ant's
IPO prospectus.
    Hangzhou Yunbo, an investment vehicle for Ma, has control
over two other entities that own a combined 50.5% stake of Ant,
the prospectus shows. Yunbo can decide all matters related to
Ant and exercise the combined voting power of the three
entities, the prospectus shows. 
    Ma holds a 34% equity interest in Yunbo, the prospectus
shows. 
    One of the sources with company ties said there's "a big
chance" Ma would sell his equity interest in Yunbo to exit from
Ant, ultimately paving the way for the fintech major to move
closer to completing its revamp and reviving its listing.
    Reuters could not reach Yunbo for comment. Ant did not
provide a comment on behalf of Yunbo.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
INSIGHT-How billionaire Jack Ma fell to earth and took Ant's
mega IPO with him     urn:newsml:reuters.com:*:nL8N2HQ0O2
Alibaba's Jack Ma makes first public appearance in three months 
   urn:newsml:reuters.com:*:nL1N2JV09Y
China fines Alibaba record $2.75 bln for anti-monopoly
violations     urn:newsml:reuters.com:*:nL1N2M3010 
China extends crackdown on Jack Ma's empire with enforced revamp
of Ant Group     urn:newsml:reuters.com:*:nL1N2M50R0
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Julie Zhu in Hong Kong and Cheng Leng in Beijing;
Editing by Sumeet Chatterjee, Paritosh Bansal and Edward Tobin)
 ((julie.zhu1@thomsonreuters.com; +852 2843 6519; Reuters
Messaging: julie.zhu1.thomsonreuters.com@reuters.net))