By Stella Yifan Xie and Serena Ng
Ant Group Co.'s market debut will bring a windfall to a
carefully curated group of international investors that bought a
piece of the company two years ago.
In the summer of 2018, the fast-growing financial-technology
giant raised $10.3 billion from investors outside mainland China,
including wealthy individuals and private funds as well as larger
institutions. It was Ant's third private capital raise and the
company's only sale of stock to foreign investors before its
initial public offering. The deal more than doubled Ant's
valuation, brought in high-profile backers and built a large war
chest to fund the company's growth and expansion plans.
The deal was highly coveted, allowing the Chinese company to
dictate terms and choose who would be allowed to buy -- and so, to
reap huge profits when it eventually went public. Ant rebuffed some
institutions that weren't offering to invest a sufficient sum, or
that had backed its rival Tencent Holdings Ltd., the Journal
previously reported. The company emerged from the sale, which
totaled $14 billion with the domestic investors included, as the
world's most valuable technology startup.
The biggest foreign buyers -- investing at least $500 million
each -- included the sovereign-wealth funds of Singapore and
Malaysia, the Canada Pension Plan Investment Board and
private-equity firms Silver Lake, Warburg Pincus, Carlyle Group and
General Atlantic, according to Ant's listing prospectus.
Mutual-fund managers T. Rowe Price Group Inc., BlackRock Inc. and
Fidelity Investments were in for $200 million to $500 million.
Private-equity firm KKR & Co. considered investing but
ultimately didn't, according to a person familiar with the matter.
Instead, current and former executives, including Henry Kravis,
KKR's co-chairman and co-chief executive officer, invested around
$35 million via a private investment vehicle they controlled,
according to Ant's prospectus and the person familiar with the
move. KKR declined to comment.
Other well-connected buyers in 2018, according to the
prospectus, included Hong Kong billionaire and tycoon Li Ka-shing,
the children of Tung Chee-hwa -- Hong Kong's chief executive from
1997 to 2005 -- and the son of Taiwanese tycoon Samuel Yin. All
invested using private investment vehicles.
The more than 40 foreign investors in Ant, which is controlled
by Chinese billionaire Jack Ma, are likely to see their stakes
nearly double in value when the company is listed in early
November. It is raising at least $34.4 billion in IPOs split
equally between Hong Kong and Shanghai.
The share sales will value Ant at $313 billion just before its
trading debut, more than twice the $150 billion valuation it
achieved in the 2018 fundraising. At the IPO price, those
investors' gain will be roughly 84%, The Wall Street Journal
"It is unusual for investors to put in so much money and make
big returns so quickly," said Min Lin, a founding partner at
NewQuest Capital Partners, a firm that provides liquidity solutions
to private-equity funds. China has produced many high-growth
companies in recent years, she said, but few with the size and
scale of Ant.
"Ant's earlier fundraising was very tightly controlled, and
everyone who got to invest earlier was selected by Ant's management
because of their status or their strategic importance to the
company," Ms. Lin added.
Ant's market value could climb after the company is listed. A
recent Bernstein Research poll of 94 investors found most believed
Ant was worth between $300 billion and $375 billion, and its
implied price-to-earnings multiples were more like those of
technology companies than financial-services firms.
The Hangzhou-headquartered company owns Alipay, a payments and
lifestyle app with more than one billion users in China. Ant has
grown revenues rapidly by facilitating more mobile payments,
originating numerous loans to individuals and businesses, and
selling mutual funds and insurance products.
The company closed the books for the $17.2 billion Hong Kong leg
of its IPO on Wednesday, a day earlier than scheduled, due to
strong world-wide demand -- including from U.S. mutual funds and
other large institutions.
In Shanghai, Ant earlier sold about 80% of its shares on offer
to so-called strategic investors, among them its former parent
Alibaba Group Holding Ltd. and institutions including China's
national pension fund, Singapore's sovereign-wealth fund and the
Canada Pension Plan Investment Board. The strategic investors
agreed not to sell shares for 12 months and to keep at least half
their stake for a minimum of two years.
"The very solid commitments from investors with long lockup
periods shows that the stock markets in China and Hong Kong aren't
just about the frothy retail approach," said Duncan Clark, chairman
of BDA China, a business consulting firm, and author of a book
about Jack Ma and Alibaba.
Back in 2018, some foreign investment firms decided against
buying Ant's shares because they didn't meet the standards set out
by the firms' corporate-governance rules, according to a person
familiar with the matter. What investors outside China bought was
nonvoting stock, via a Cayman Islands-incorporated subsidiary
called Ant International.
While those investors bought in expecting Ant to go public
within a few years, the company couldn't ensure that would happen.
Ant agreed to guarantee some profits to the international investors
if a listing didn't take place, according to a person familiar with
That is now moot. The nonvoting shares investors hold will be
swapped for Ant Group's new Hong Kong-listed shares upon the IPO's
completion, according to the company's prospectus.
Zhou Wei contributed to this article.
Write to Stella Yifan Xie at firstname.lastname@example.org and Serena Ng at
(END) Dow Jones Newswires
October 29, 2020 11:15 ET (15:15 GMT)
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