Alibaba Group Holding ($BABA) aims to ramp up fledgling online drug sales in China by placing online drug retailer Tmall under its listed healthcare unit in a shuffle estimated at $2.51 billion, the company said in a press release.
|Alibaba founder Jack Ma|
The deal is expected to be completed in the third quarter of 2015 with Alibaba Health paying HK$19.45 billion worth of shares and debt and then counting the online retailer as a consolidated subsidiary after completion, according to the Wall Street Journal.
"There are now 186 online-licensed pharmacies offering over-the-counter drugs, medical devices, contact lenses, and other general healthcare products which are featured on Tmall," Alibaba Group said in the press release.
"Gross merchandise value of those businesses for the financial year ended March 31, 2015 was approximately RMB4.74 billion ($774 million). After the Transaction, consumers will continue to be able to make purchases from online pharmacies through Tmall, with Alibaba Health running the business operations of aggregating online pharmacy offerings to provide the highest quality and widest consumer choice. With the integration of the online pharmacy business, Alibaba Health is well positioned to execute a focused strategy in the healthcare e-commerce sector and expand its offerings to healthcare industry participants across China."
In 2014, Alibaba and Yunfeng Capital, started by Alibaba founder Jack Ma, bought a 54% stake in Citic 21CN, a Hong Kong-listed pharmaceutical products data provider, and renamed it Alibaba Health. The market cap is now $13 billion, or 365 times sales of the most recently available revenues of the planned combined entity, the Wall Street Journal said.
In January, the China Food and Drug Administration (CFDA) said it planned to allow online sales of prescription drugs in the near future, opening up the market to existing online e-commerce platform operators like Alibaba.com and JD.com.
However, one of the biggest challenges currently blocking the emergence of online pharmacies and pharmaceutical retailers is reassuring consumers of the quality and reliability of products, a key concern of Chinese authorities after a series of food and drug quality scandals that have made consumers wary of untraceable product origins.