Ant Group reaches agreement with Chinese regulators over restructuring

Ant Group Co. and Chinese regulators have agreed on a restructuring plan that will turn Jack Ma’s fintech giant into a financial holding company, making it subject to capital requirements similar to those for banks.

The plan calls for putting all of Ant’s businesses into the holding company, including its technology offerings in areas such as blockchain and food delivery, people familiar with the matter said. One of Ant’s early proposals to regulators had envisioned putting only financial operations into the new structure.

An official announcement on the overhaul could come before the start of China’s Lunar New Year holiday next week, the people said, asking not to be identified discussing private information. Alibaba Group Holding Ltd., which owns about a third of Ant, erased losses in Hong Kong trading on Wednesday after Bloomberg reported the agreement. The stock closed with a 0.4% gain.

Some market participants had been speculating Ant might be forced to spin off portions of its business, which now looks unlikely, said Shujin Chen, Hong Kong-based head of China financial research at Jefferies Financial Group Inc.

Ant’s restructuring plan marks the first big step in what’s expected to be a lengthy overhaul process, as regulators draw up detailed capital requirements and other guidelines for companies that span multiple financial business lines.

China only introduced its framework for financial holding companies in September, and many of the specifics are still being ironed out. While the rules will eventually provide more regulatory clarity for Ant, they’ll almost certainly force the company to slow the torrid pace of expansion that has made it China’s dominant fintech player and one of the world’s most valuable startups.

Ant is still exploring possibilities to revive its initial public offering, which was abruptly halted by regulators in November, one person familiar with the matter said. But given the financial holding company framework is so new, it’s unclear how long it might take for authorities to sign off on a listing.

Bloomberg Intelligence analyst Francis Chan estimates Ant’s valuation could drop to $108 billion. Ant fetched a $280 billion pre-money valuation before its IPO was halted.