Imitation as flattery

7 March 2017 By Robyn Mak Follow @mak_robyn

Boss Richard Liu is separating the finance business valued at $7 bln out of the e-commerce group and taking a direct stake for himself. It is less controversial than when Alibaba did the same in 2011. But there are enough similarities with this cosy deal to sound an alarm.

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Chinese e-commerce group JD.com said on March 2 that it had reached an agreement to sell its 68.6 percent equity stake in its internet finance business, JD Finance, to a group of investors.

As part of the deal, JD.com will receive 14.3 billion yuan ($2.1 billion) in cash and a 40 percent claim on JD Finance's future pre-tax profit. JD.com will also have an option to convert its profit sharing agreement into a 40 percent equity stake, subject to regulatory approvals.

The company did not disclose who the buyers were apart from JD.com's chief executive, Richard Liu, who will acquire a 4.3 percent equity stake in the reorganised entity. Liu will also have a majority of voting rights in JD Finance.

In January, JD.com said it raised 6.7 billion yuan for JD Finance at a valuation of 46.7 billion yuan on a fully-diluted, post-investment basis. Investors in that round included Sequoia Capital China, China Harvest Investments, and China Taiping Insurance.

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