China’s e-commerce titan Alibaba Group announced today it has agreed to transfer the operations of Tmall online pharmacy business to Alibaba Health Information Technology Ltd. [Alijk.com], the Hong Kong-listed health affiliate of the company, in exchange for the newly issued shares and convertible bonds of the latter. The deal is expected to be finalized by the third quarter of this year, according to the company.
Alibaba Group currently owns a 38.1% stake in Alibaba Health, formerly CITIC 21CN which is a licensed online drug seller with a vast pool of pharmaceutical product data. Alibaba Group and Yunfeng Capital, a venture capital co-founded by Alibaba chairman Jack Ma, acquired a combined 54.3% stake in CITIC 21CN in January last year, and company was renamed as Alibaba Health in August of the same year.
Upon completion of the deal, Alibaba Group’s effective equity ownership of Alibaba Health will increase to about 53%, making the company a consolidated subsidiary of Alibaba Group.
Alibaba’s Tmall marketplace has attracted overall 186 licensed online pharmaceutical retailers, selling OTC drugs, medical instruments, contact lenses and other health care products. Tmall’s online pharmaceutical business has generated a sales of RMB4.74 billion (around US$763 million) in the one-year period ending in March 2015, the company disclosed.
Customers still can purchase pharmaceutical products on Tmall after this transfer, but Alibaba Health will be the new operator of the business.
According to their statement, Alibaba hopes to better integrate health resources in a bid to construct an inter-connected ecosystem of healthcare services.