JD.com to sell its stake in JD Finance for US$2.1b to unnamed buyer

PUBLISHED : Thursday, 02 March, 2017, 10:20pm
UPDATED : Thursday, 02 March, 2017, 10:20pm

JD.com, China’s second largest e-commerce player after Alibaba Group, has agreed to sell its finance arm as part of a spin-off deal that potentially creates the biggest rival to billionaire Jack Ma Yun’s Ant Financial.

The Nasdaq-listed JD.com said on Thursday it agreed to sell all of its equity stake of 68.6 per cent in the rapidly growing JD Finance in exchange for 14.3 billion yuan (US$2.1 billion) in cash. JD will get 40 per cent of the finance arm’s future pretax profit and it has reserved the right to swap this for 40 per cent of the finance unit’s equity, subject to applicable regulatory approvals.

Under the deal, Richard Liu Qiangdong, chairman and chief executive of the Beijing-based company, will take about 4.3 per cent of the unit, but maintain a majority of voting rights through proxy agreements.

JD. com didn’t reveal the buyer of its finance unit, which offers online financial services such as small loans and wealth management to small businesses and individuals, similar to what Alibaba-backed Ant Financial offers. The transaction is expected to close in mid 2017, the company said in a statement.

JD.com expands online finance business to insurance, banking in bid to topple Alibaba

The deal was announced on Thursday as JD.com reported better-than-expected fourth quarter revenue for 2016. “The transactions of JD Finance have grown more than eight times over the past three years, exceeding 1 trillion yuan in 2016. We aim to make JD Finance one of the top three fintech companies in the world by 2020, serving thousands of financial institutions and millions of enterprises,” Liu said at the company’s annual meeting in early February.

The spinoff of JD Finance has been anticipated by the market, with speculation that JD was eyeing a listing of its finance arm in 2020.

The transactions of JD Finance have grown more than eight times over the past three years
Richard Liu Qiangdong, JD.com chairman and chief executive

JD Finance was ranked No 10 globally in KPMG’s 2016 Fintech 100 list. China’s Ant Financial Services Group topped the list. Ant Financial is controlled by Jack Ma Yun, whose Alibaba is owner of the South China Morning Post.

Ant Financial is valued at US$60 billion following its US$4.5 billion fundraising round last year, which was touted as the largest private technology funding round in history.

JD.com reported a 44 per cent jump in revenue last year to 260.2 billion yuan, up from 181.3 billion yuan in 2015, on the back of its strong direct sales business and a 46 per cent year-on-year increase in active customer accounts to 226.6 million.

Gross merchandise volume from direct sales grew 46 per cent year-on-year to 372.3 billion yuan, while the gross merchandise volume from its online marketplaces rose 61 per cent to 272 billion yuan.

Its net loss narrowed to 3.5 billion yuan last year, compared with 9.4 billion yuan in 2015, amid rising fulfilment expenses as well as higher marketing, technology and content, and general administrative costs.