Alibaba’s affiliate Ant Financial is in talks with banks to raise between $2 billion and $3 billion in debt to fund acquisition and foreign investments, says Reuters, citing a source with direct knowledge of the matter.
“It is the market practice for a globalized company like Ant Financial to raise debt in U.S. dollars,” a company representative told Reuters.
Ant prefers debt over equity
Ant Financial is being supported by banks to get loans, which in turn will be used to acquire companies like MoneyGram International and support existing investments, says Reuters. In the face of favorable bank rates, Ant has decided to raise funds via debt rather than going the equity way like other companies. Jack Ma, founder of Alibaba, also controls Ant.
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Ant is set to be listed on a stock exchange and is valued at around $60 billion after last year’s $4.5 billion funding round. However, the firm has not stated the time or the exchange on which it will list.
Ant has an upper hand in China’s online payment market, but the company has been expanding its investments overseas to combat competition with peers like Tencent Holdings Ltd’s WeChat Pay. Alipay, Ant’s payment service with a user base of 450 million, is looking to strategically expand itself overseas.
Only last month, Ant Financial announced that it will buy U.S. money transfer company MoneyGram for about $880 million. The company has also invested in Indian Mobile payment and e-commerce website Paytm and Thai financial technology firm Ascend Money.
MoneyGram deal is very important for Alibaba
The MoneyGram deal will give Ant a strong presence in the United States. The company is a perfect acquisition target, as it complements Alipay’s vast digital footprint and could be a determining factor for Alibaba.
Alibaba is looking to enter the e-commerce space globally on the back of easier payment services and also minimize its over dependence on its core business in Asia. There is no doubt that Alibaba is performing well, and it raised its global guidance in the last quarter, but the e-commerce giant is aware of Wall Street’s fickle nature and the impact that China’s economy can have on its business. Therefore, Ant Financial’s new funding and potential M&A spree could help it expand into other areas and regions.
On Wednesday, Alibaba shares closed up 2.72% at $103.57.