Alibaba has announced on Tuesday that the company will inject its online pharmacy business into a listed unit in a deal valued at $1.35 billion (HK$10.6 billion).
Alibaba Health Information Technology Ltd is to buy Ali JK Nutritional Products Holding Ltd, the unit controls the sales of healthcare products, medical equipment & devices, adult products and healthcare services on Alibaba’s Tmall platform.
The deal will provide Alibaba with more control over, the company will issue new shares in Ali health unit which will increase the economic interest of the company from 48.1 percent to 56.2 percent. The parent Alibaba will also have the voting right to 67.5 percent after the deal closes.
The deal is focused on improving Ali Health business amid growing competition in the fast-growing healthcare technology market. Other Chinese firms such as WeDoctor which is backed by Tencent Holdings and a newly listed company Ping An Healthcare are already in the market with strong presence in the region.
The deal will turn Alibaba’s to be the best healthcare ecosystem in the country, the healthcare business area is strategically very important for the firm, Ali Health CEO, Daniel Zhang said in a statement. The deal will let Alibaba add more categories to Ali Health’s business, he added.
Chinese healthcare spending is increasing quite fast, according to McKinsey & Co, the total healthcare spending in China will reach $1 trillion by 2020 up from $357 billion in 2011.
The technology firms are looking to tap this market potential with growing private healthcare spending in China. The business being added to Ali Health has generated merchandise volume of 20.56 billion Yuan ($3.21 billion) in the previous financial year and had 3,300 related merchants, said Ali Health.
The deal is still pending for approval from Ali Health Shareholders and Hong Kong Stock Exchange.