Alibaba to split into six entities and explore IPOs

Move designed to unlock shareholder value and foster market competitiveness

In the last quarter, Alibaba’s net income jumped 138 per cent on a yearly basis to more than $6.6 billion. AFP

Chinese technology company Alibaba Group on Tuesday said it will restructure its business into six commercial groups and explore listings for most of them, as it aims to become “nimble” and boost its operations.

The major revamp is designed to “unlock shareholder value and foster market competitiveness”, said the Hangzhou-based company, which specialises in e-commerce, retail, internet and technology.

The six business groups will be: Cloud Intelligence, Taobao Tmall Commerce, Local Services, Cainiao Smart Logistics, Global Digital Commerce and Digital Media and Entertainment.

This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes

Daniel Zhang,
chairman and chief executive of Alibaba

The restructuring will provide “markets with better visibility into the value of Alibaba’s various businesses and unlock shareholder value”, the company said.

Daniel Zhang will continue to serve as chairman and chief executive of Alibaba, which will follow a holding company management model, while each of the six business groups will be managed by its own chief executive and board of directors.

Mr Zhang will also serve as the chief executive of the Cloud Intelligence Group, which will house all cloud, artificial intelligence activities and businesses like DingTalk.

“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs [initial public offerings] when they are ready,” Mr Zhang said in a memo to employees.

“This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes.”

Alibaba’s business is booming. In the quarter that ended on December 31, 2022, its net income jumped 138 per cent on a yearly basis to more than $6.6 billion. The company's sales rose 2 per cent annually to more than $35.9 billion in the October-December period.

Restructuring is not new to the company.

In 2015, it introduced a middle-platform strategy that gave rise to a “large middle platform, small front office” organisational model.

In 2020, it implemented a diversified organisational governance structure that empowered key businesses with management responsibility.

The latest initiative marks one of the most significant governance overhauls in Alibaba's 24-year history and intends to position the company’s businesses to become “more agile so as to better capture market opportunities and stimulate growth”.

The Taobao Tmall Commerce Group will include China commerce activities such as digital marketplaces Taobao and Tmall, value-for-money platform Taobao deals, community marketplace business Taocaicai, wholesale marketplace 1688.com and other businesses.

Each business group will retain the flexibility to raise outside capital and seek an IPO. The Taobao Tmall Commerce Group will be an exception as it will remain wholly-owned by Alibaba.

The restructuring news comes a day after Jack Ma, Alibaba's co-founder, was seen in China after a long absence. The billionaire on Monday visited a private school in the eastern city of Hangzhou, where the company has its headquarters.

Mr Ma, 58, who has rarely been seen in public in the past three years, has kept a low profile since China’s regulatory crackdown on his companies in late 2020.