Alibaba Sells Assets to Healthcare Unit in $1.4 Billion Deal

(Bloomberg) -- Alibaba Group Holding Ltd. is selling assets from medical devices to drugs for HK$10.6 billion ($1.4 billion) to a Hong Kong-listed unit that will then become its flagship healthcare arm.

Alibaba unveiled a deal Tuesday under which it will inject a plethora of businesses -- from its online Tmall pharmacy to adult products such as condoms --- into Alibaba Health Information Technology Ltd., in return for HK$10.6 billion worth of new stock in the affiliate. The Hong Kong-listed firm’s getting assets that generated 20.6 billion yuan ($3.2 billion) of transactions last fiscal year, a big boost for the loss-making company.

Its shares, which had rallied more than 50 percent since mid-May before the deal ever saw the light of day, gained another 3.6 percent Tuesday.

China’s leading e-commerce operator is pushing deeper into a state-dominated healthcare sector, vowing to transform an outmoded model with data and cloud computing. In assuming outright control, Alibaba will let the listed unit take the lead in expanding its footprint in a Chinese market estimated at 4.6 trillion yuan. Alibaba’s also been steadily folding in the disparate strands of its sprawling empire, from logistics arm Cainiao and video service Youku to its Southeast Asian e-commerce platform Lazada.

“Healthcare is a strategically important area for Alibaba Group with strong growth potential,” Chief Executive Officer Daniel Zhang said in the statement. “This transaction is a logical evolution for the continued development of Alibaba Health into our healthcare flagship platform.”

After the deal, Alibaba will control a 56.2 percent economic interest and 67.5 percent of voting interest in the company. The transaction remains subject to the approval of independent Alibaba Health shareholders and the Hong Kong Stock Exchange.

The announcement follows almost two weeks of frenetic trading in Alibaba Health, the best-performing stock on the MSCI Asia Pacific Index for the month. The company remains mired in losses and until last week, its stock wasn’t covered by a single analyst.

Alibaba Sells Assets to Healthcare Unit in $1.4 Billion Deal

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