Alibaba announces separation of business into six companies

Alibaba has announced that it is splitting its $220 billion business into six major divisions that will raise funds independently and plan an IPO. Alibaba shares rose 9 per cent on the news at a premarket in New York.

"Only through self-reform can we create the future," Alibaba Group CEO Daniel Zhang said in a letter sent to employees. He stressed that this is "the most important organisational change at Alibaba in 24 years".

As part of the plan, six major business groups will be created: Alibaba Cloud Intelligence (the cloud business will be led by Zhang himself, signalling the growing role of AI in the e-commerce leader's portfolio), Taobao Tmall (group chief executive Trudi Dai will head the online shopping division), International Digital Commerce (former head of international retail Jiang Fan will head the digital business division), and Local Life (includes the food delivery business), Cainiao (logistics) and Dawen Entertainment (digital media and entertainment).

Each business group will have its own boards of directors. They will be controlled by Alibaba Group under a holding company management model. "The market is the best touchstone. In the future, qualified business groups will be able to conduct independent financing and listings," Zhang said in the letter.

The news of Alibaba's restructuring followed a promise by the Chinese authorities to support the private sector, recalled UOB Kay Hian executive director Stephen Leung. "If China wants to achieve its GDP growth target of 5 per cent, it needs to support companies like Alibaba," he stressed.