Categories: Fundamental Analysis

Alibaba injects pharmacy business into HK-listed affiliate in $2.5 billion deal

SHANGHAI (Reuters) – Chinese e-commerce firm Alibaba Group Holding (N:BABA) is injecting its online pharmacy operations into a Hong Kong-listed affiliate in a $2.5 billion deal to consolidate its healthcare enterprise and ride a boom in online health-related business.

Shares in the affiliate, Alibaba Health Information Technology Limited (HK:0241), nearly doubled early on

Wednesday after the announcement, resuming trading after being suspended since March 20.

Under the deal, Alibaba Health will buy 100 percent of the online pharmacy operations from a wholly owned subsidiary of Alibaba Group and another investor for HK$19.45 billion ($2.5 billion). It will issue shares and bonds to fund the purchase, with the shares priced at HK$5.28 each.

“We expect that this integration will enable Alibaba Group to build a healthcare ecosystem that can utilize e-commerce, big data and other technologies to improve the healthcare supply chain,” Alibaba Group chief operating officer Daniel Zhang said in a statement.

Online pharmacies are currently limited to selling over-the-counter medicines and healthcare products such as cough remedies and vitamin tablets, but China is gearing up to open the over 1 trillion yuan ($161 billion) prescription drug market to online pharmacy operators like Alibaba Health, JD.com (O:JD) and Wal-Mart Stores Inc (N:WMT).

Beijing hopes to boost retail drug sales at pharmacy chains and online, and wrestle some sales away from hospitals, which currently control around three-quarters of drug sales.

Alibaba said there were currently 186 online-licensed pharmacies on its Tmall online marketplace. Gross merchandise value (GMV) of those businesses for the financial year ended March 31, 2015 was approximately 4.74 billion yuan, it said. After the consolidation, consumers will still to be able to access online pharmacies through Tmall.

The deal, which is subject to approval by independent shareholders of Alibaba Health, is expected to be completed in the third quarter this year, raising Alibaba Group’s effective equity ownership of Alibaba Health to about 53 percent from 38 percent and making it a consolidated subsidiary, it said.

Rivals such as Tencent Holdings (HK:0700), JD.com and Baidu (O:BIDU) have all made moves to get into China’s online healthcare market, seen as a potential cure for a fragmented and opaque market controlled by state-run distributors and hospitals.

“All these online healthcare services will help better integrate asymmetrical and highly fragmented healthcare services in China,” said Goldman Sachs (NYSE:GS) healthcare analyst Wei Du in a recent report.

($1 = 7.7504 Hong Kong dollars)
($1 = 6.2073 yuan)

Source: reuters.com, investing.com

Advertisement

Click To Join Our Community Telegram Group

Vladimir Ribakov

Following 11+ years of trading experience, trading my own accounts as well as for hedge funds and brokerages, I have decided to fulfill my destiny and to personally mentor Forex and Commodities traders. When I released the “Broker Nightmare” (software that hides trades from brokers) 8 years ago, I found an overwhelming number of frustrated people who genuinely wanted to learn how to trade the Forex market, but instead found themselves scammed and misled. Over the years I have also release other trading systems based on my trading strategies, and met a lot of people on my worldwide Forex seminars. We’ve formed a close Forex community and we meet once or twice a year in various locations in Europe.

Recent Posts

Weekly Summary And Review 20th December 2024

Hi Traders! Arvinth here from the Home Trader Club team. The weekly summary and, review of December…

3 days ago

US Stocks Face Headwind From Rising Yields After Fed Signals Fewer Rate Cuts

The rally in U.S. stocks is encountering a fresh hurdle -- a potentially problematic rise…

4 days ago

EURAUD Short Term Forecast And Technical Analysis

Hi Traders! EURAUD short term forecast and technical analysis post is here. We do our…

4 days ago

GBPCHF Short Term Forecast Follow Up and Update

Hi Traders! GBPCHF short term forecast follow-up and update is here. On October 3th, 2024…

5 days ago

AUDJPY Short Term Forecast And Technical Analysis

Hi Traders! AUDJPY short term forecast and technical analysis post is here. We do our…

5 days ago

GBPCAD Short Term Forecast Update And Follow Up

Hi Traders! GBPCAD short term forecast update and follow up is here. On November 26th,…

6 days ago