Alibaba Group Holding Ltd (NYSE:BABA) is now planning to shift its online pharmacy, Tmall, to its healthcare subsidiary. The shift has been estimated to be worth $2.51 billion. The move is part of an effort by the company to focus more on healthcare. The details of the deal state that the company would shift the pharmacy from China to Hong Kong, where it will be traded under Alibaba Health Information Technology Ltd. This would be done in exchange for shares and convertible debt, which brings the company’s stake in Alibaba Health to 55% from the present 38%.
The deal is to be completed by 3Q2015, with Alibaba Health paying Hong Kong $19.45 billion worth shares and debt to the group, while still being treated as a subsidiary. The transfer of shares would be taking place at HK $5.28 per share, which is 20% lower than the current share price HK $6.68. The move is targeted to make use of the opportunity, provided by Chinese government rethinking its healthcare system. Following the deal, the Alibaba Group is planning to take the lead in being one of the best healthcare providers in the country. It hopes to do this by selling prescription pharmaceuticals, if the Chinese officials allow retailers to move in that direction.
Currently, the Chinese prescription drugs industry values at around $149 billion, but they are not allowed to be sold online. Should the government change these rules, it would prove highly advantageous for Alibaba’s Tmall. Tmall offers its customers the ability to buy healthcare related products and services, register appointments with doctors, receive electronic copies of results from any diagnostics and even sell household items online. The move, under Hong Kong rules, is seen as a reverse takeover, since the parent company still owns the health arm.
Alibaba Group Holding Ltd (NYSE:BABA) closed at $84.67, dropping by 0.39% on April 16. The company trades a huge 2.49 billion shares in the market, with a 52-week range of $80.03-$120.
