Alibaba sells medical assets to Hong Kong arm for US$1.4 billion as it targets China healthcare

Alibaba Group is selling assets from medical devices to drugs for HK$10.6 billion (US$1.4 billion) to a Hong Kong-listed unit that it’ll take control of and turn into its main health care 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. It will control a 56.2 per cent economic interest and 67.5 per cent of the voting interest in the company after the transaction.

China’s leading e-commerce operator is pushing deeper into a state-dominated health care sector, vowing to transform an outmoded model with data and cloud computing. By taking outright control of the business, Alibaba can connect better with customers, smooth operations and allow the unit to take the lead in expanding Alibaba’s footprint in a Chinese market estimated at 4.6 trillion yuan (US$719 billion). Alibaba’s steadily folded in the disparate strands of its sprawling empire from logistics arm Cainiao and video service Youku to its southeast Asian e-commerce platform Lazada.

“Health care 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 health care flagship platform.”

The transaction remains subject to the approval of independent Alibaba Health shareholders and the Hong Kong stock exchange.

Alibaba’s announcement follows almost two weeks of frenetic trading in Alibaba Health, which had rallied about as much as 60 per cent since mid-May – ranking it one of the best-performing stocks on the MSCI Asia Pacific Index for the month.

Alibaba is the parent company of the South China Morning Post.