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Exclusive: China’s Ant explores ways for Jack Ma to exit as Beijing piles pressure

By Julie Zhu

HONG KONG (Reuters) – Ant Group is exploring options for founder Jack Ma to divest and relinquish control of his stake in the financial technology giant, as meetings with Chinese regulators pointed out the move could help it become Draw line under the supervision of Beijing. according to a source familiar with the thinking of regulators and two people with close ties to the company.

Reuters is reporting details for the first time from the latest round of meetings and the discussions about the future of Ma’s control over Ant, exercised through a complicated structure of investment vehicles. The Wall Street Journal previously reported that at a meeting with regulators in November, Ma had offered 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 separate talks with Ma and Ant between January and March, discussing the possibility of the tycoon’s departure from the company. was discussed, according to reports from the source familiar with the thinking of the regulators and one of the sources with close ties to the company.

Ant denied that a divestment of Ma’s interest was ever contemplated. “The sale 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 that 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 without the intervention of an outside entity, one of the sources associated with the company said. .

But the second source, also with ties to the company, said that during discussions with regulators, Ma was told that he should not sell his stake to an entity or person close to him, and should instead leave completely. Another option would be to transfer its stake to a state-affiliated Chinese investor, the source said.

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Any move would require Beijing’s approval, both sources said with knowledge of the company’s thinking.

The reports provided by all three sources are consistent in terms of the timeline for how the discussions have developed in recent months. On the company’s side, a source said Ma had met with 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 few months ago. The source familiar with the regulators’ thinking said Ant had told officials at a meeting sometime before mid-March that it was working on options.

The source familiar with the regulators’ thinking has direct knowledge of the talks between Ant and officials, while one of the sources associated with the company has been briefed on Ma’s interactions with regulators and Ant’s plans. The other has direct knowledge of Ant’s discussions of options. They asked for anonymity because of the sensitivity of the situation.

The Ant spokesman did not comment from Ma. Alibaba referred inquiries to Ant. Jack Ma’s office did not respond to Reuters’ request for comment through Ant. The State Council Information Office, PBOC and CBIRC also failed to respond to requests for comment.

The high-stakes discussions come amid a revamp of Ant and broader regulation of the Chinese technology sector that was set in motion following Ma’s public criticism of regulators in a speech last October.

Ma’s departure could pave the way for Ant to revive plans that stalled after the tycoon’s speech, both sources near the company said. Ant, on the verge of raising an estimated $ 37 billion in what would have been the world’s largest IPO, broke plans the day after Monday’s November 2 meeting with regulators.

‘TOO BIG FOR THEIR BRITCHES’

Since then, Beijing has unleashed a series of investigations and new rules that have not only kept Ma’s empire in check, but also traversed the country’s technology sector, including other high-profile billionaire entrepreneurs.

For Ma, 56, who also founded Alibaba and once enforced cult-like reverence in China, the consequences were particularly dire. The tycoon completely withdrew from the public eye for about three months and went unnoticed after a brief appearance in January.

The Chinese antitrust regulator imposed a record fine of $ 2.75 billion on Alibaba on April 10 following an anti-monopoly investigation that found it had abused its dominant market position for years. A few days later, Ant was asked by the central bank to become a financial holding company, putting it under the banking rules it had so far avoided and allowing for rapid growth.

“China still loves to promote its technology companies as world leaders, as long as they don’t get too big for their pants,” said Andrew Collier, CEO of Orient Capital Research.

CONTROL OF INTEREST

Although Ma had previously stepped down from corporate positions, he retains effective control over Ant and significant influence over Alibaba.

Although he only owns a 10% stake in Ant, according to Ant’s IPO prospectus, Ma exercises control of the company through related entities.

Hangzhou Yunbo, an investment vehicle for Ma, controls two other entities that together own a 50.5% stake in Ant, according to the prospectus. Yunbo can decide all matters relating to Ant and exercise the combined voting rights of the three entities, according to the prospectus.

Ma has a 34% shareholding in Yunbo, according to the prospectus.

One source with corporate ties said there is “a high probability” that Ma would sell his equity stake in Yunbo to leave Ant, ultimately paving the way for the fintech major to move closer to completing his revamp and to get new life in the listing.

Reuters was unable to reach Yunbo for comment. Ant did not comment on Yunbo’s behalf.

(Reported by Julie Zhu in Hong Kong and Cheng Leng in Beijing; edited by Sumeet Chatterjee, Paritosh Bansal and Edward Tobin)

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