Alibaba will buy a huge share in AGTech to re-enter the lottery business of China to extend its portfolio.
Alibaba and its major financial affiliate will pay $308 million (HK$2.39 billion) to purchase control of AGTech to expand its lottery business with in China. Ali Fortune Investment Holding, an enterprise majorly owned by Alibaba has agreed to purchase shares worth $220 million and convertible bonds worth $91.75 million in AGTech. It will owe around 59.45% of the business upon an entire conversion, as filed to the Hong Kong stock exchange on Sunday.
The takeover marks the Chinese online retailer’s return into the profitable lottery businesses of China, following the suspension of operations because of the increasingly onerous restrictions placed by the government.
AGTech, which is running lotteries in a number of Chinese provinces, will extend its games, distribution, and hardware across the nation, the organization said. The lottery business of China, which is regulated strictly by the country’s government, had a participation rate of around 7.5% in 2013, which is less than 56% in the Chinese special administrative region for 2012, demonstrating potential to grow. In the US, the lottery business has a participation rate of 57%.
Alibaba and its financial affiliate will help the lottery company with cloud computation, according to its email on Monday. AGTech’s stock decreased 2% to 25 cents. Alibaba owns 60% of Ali Fortune, while Alipay–operator Ant financial owns the remaining 40%. Alibaba earnings ending in September were damaged by the suspension of its lottery business since late February 2015 due to the imposition of regulation restrictions, the organization told during a conference call held in October.
Following the acquisition of the lottery operator, Alibaba will get the right to appoint five non-executive directors to AGTech’s nine-person board. It aims to further extend the organization’s distribution, hardware, games and lottery business in the country, leveraging the mobile payment methods of the internet giant, online trading channels and different other platforms to let AGtech grow aggressively.
AG engages in a number of gaming technologies including terminals, hardware systems, game software, mobile and online lottery, and lottery management.
It’s team is over 200 professionals and its lottery business foothold covers four-fifth of the municipalities and provinces across the country, revealed by the website. In other news, Tech In Asia reported that the Chinese organization has teamed up via an investment of $160 million with the Chinese largest automaker SAIC Motor to develop smart internet-connected vehicles. In April, the collaboration’s first product will be launched at the Beijing Auto Show (BAS).
Virtually every major Chinese internet company is involved in a vehicle related venture, but Alibaba appears to be the one and only BAT company to launch a commercial vehicle. Forbes reported that Chinese banks have lost $22 billion to Tencent and Alibaba last year.