Thursday , September 24 2020

Goldman, BofA left off Ant IPO for work with Alibaba rivals

Bloomberg

Goldman Sachs Group Inc. and Bank of America Corp. (BofA) were left off Ant Group’s upcoming stock sale in Hong Kong because of their past work with rivals of its affiliate Alibaba.
Bankers have been told by senior executives at Alibaba Group Holding, which owns a third of Ant, that they should refrain from doing deals for its competitors if they want business from Jack Ma’s sprawling empire. Ant kicked off plans to go public in Hong Kong, Shanghai.
The directive shows that Wall Street banks have to make early bets on which firms to stick with in China, especially as juggernauts like Alibaba and Tencent Holdings Ltd. extend their tentacles into hundreds of businesses in finance, transportation, retail and entertainment.
While bankers everywhere have to be careful doing work for their clients’ rival firms, Chinese conglomerates are taking it to a new level. Even though banks have firewalls to ensure separate teams handle deals for the likes of Alibaba and Tencent, that’s proving to not be enough.
Chinese clients are much more likely than their counterparts in the US or Europe to demand non-compete commitments as a show of loyalty, and to ensure that sensitive strategies don’t land in the hands of competitors. And with fewer deals to go around, bankers in the hyper-competitive Chinese market have little choice but to comply.
Ant is aggressively competing with Tencent’s WeChat Pay to maintain its dominance of China’s $29 trillion mobile payments space. It has been pitching digital payment services to the local arms of KFC Holding and Marriott International as it transforms its Alipay app into an online mall for everything from loans and travel services to food delivery.

Though minor distribution roles on Ant’s Hong Kong IPO are still up for grabs, those don’t offer the out-sized fees that banks can expect from leading the sale.
“Competition has increased and Chinese issuers have gotten strong bargaining power,” said Bob Dodds, who worked as an investment banker at China International Capital Corp. before setting up DRP Capital Ltd. to advise on China-related deals.
Goldman and Bank of America’s recent work with Alibaba rivals include $7.7 billion in stock sales for Tencent-backed Pinduoduo Inc. and JD.com Inc. in the last two years, helping these companies build their war chests to take on their larger competitor in the hotly contested e-commerce arena.
The two banks have reaped at least $70 million from advising Pinduoduo and JD.com on stock deals, according to data compiled by Bloomberg. The figure doesn’t include the undisclosed fees of a $1 billion bond sale by Pinduoduo in September and the $4.5 billion secondary listing by JD.com in June.
Representatives at Goldman and Bank of America declined to comment. Ant and Alibaba declined to comment in separate emailed statements.
Ant is aggressively competing with Tencent’s WeChat Pay to maintain its dominance of China’s $29 trillion mobile payments space. It has been pitching digital payment services to the local arms of KFC Holding Co. and Marriott International Inc. as it transforms its Alipay app into an online mall for everything from loans and travel services to food delivery.
Alipay’s share of mobile payments has increased for three consecutive quarters, rising to 55.1% in the fourth quarter, according to consultant iResearch. Tencent has 38.9% of the market.
Ant hired Citigroup Inc., JPMorgan Chase & Co., Morgan Stanley and CICC to lead its Hong Kong IPO. The sale is expected to raise more than $10 billion and could value the firm at $200 billion, people familiar have said. Ant hasn’t selected banks for the Shanghai portion, though global firms will probably be left out because lead underwriters for any IPO on the tech-focused Star board must buy shares in the deal.
Banks leading the Ant IPO in Hong Kong have fewer conflicts. While Morgan Stanley earned $6.4 million for a junior role in Pinduoduo’s stock sale last year — about half of Goldman’s haul — Citigroup and JPMorgan weren’t involved in those deals, Bloomberg data shows.

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