Alibaba Group announced today that it has agreed to sell several of the healthcare categories on Tmall, its B2C shopping platform, to digital healthcare subsidiary Alibaba Health Information Technology. In exchange, Alibaba Group will receive $10.6 billion HKD (about $1.35 billion) in newly issued shares of Alibaba Health and increase its equity stake in the company, which is listed on the Hong Kong stock exchange, from 48.1% to 56.2%.
If you have followed Alibaba Group for a while and this news is giving you a feeling of déjà vu, there’s a reason why. In April 2015, Alibaba Group made a similar announcement, saying that it had agreed to integrate Tmall’s pharmacy business into Alibaba Health in exchange for a majority stake.
The next year, however, Alibaba Health disclosed to the Hong Kong Stock Exchange that it had let the proposed deal lapse because of regulatory uncertainties as the Chinese government reviewed legislation related to online drug sales. In that disclosure, it also said that Alibaba Group “continues to support [Alibaba Health] to execute an organic growth and investment strategy as the healthcare flagship company for Alibaba Group,” with the two companies exploring service agreements between Tmall and Alibaba Health.
While the deal announced today is still subject to shareholder and regulatory approval, it furthers Alibaba Group’s goal of consolidating more of Tmall’s pharmacy and healthcare business operations into Alibaba Health. These include Tmall categories like medical devices and healthcare products and medical services, which in total cover 3,300 vendors and generated 20.6 billion RMB (about $3.2 billion) in gross merchandise volume in the fiscal year that ended in March.
Vendors moving over to Alibaba Health will now have access to its ecosystem, including data analytics, hospitals, doctors, healthcare consultants and equipment suppliers, creating more growth and synergy opportunities, an Alibaba spokesperson told TechCrunch.
In a press statement, Daniel Zhang said “Healthcare is a strategically important area for Alibaba Group with strong growth potential. This transaction is a logical evolution for the continued development of Alibaba Health into our healthcare flagship platform.”