Alibaba Group Holding Limited (NASDAQ:BABA) has finalized a deal that moves its pharmacy business to its Hong Kong based unit. This deal cost nearly $2.5 billion to the company that seeks to grab the opportunities in healthcare sector in China.
The new unit called Alibaba Health Information Technology (AHIT) was formed last year. This new arm was created when Perfect Value, a subsidiary of Alibaba Group Holding, bought 54% shares from a company known as Citic21CN. The company tracked the distribution of medicines from online data. Alibaba Group Holding Limited (NASDAQ:BABA) has decided to sell its online pharmacy business to this company.
Alibaba Health Information Technology is not wholly owned subsidiary of the group. The company will hold 56 % stake, once the deal goes through. After the deal, AHIT will be able to conduct web pharmacy business that will allow the company to sell over the counter drugs on the web.
In exchange for this, the company will be acquiring shares with 20% discount. This means that the company will be benefited from the 186 suppliers that were previously available with Alibaba Group Holding Limited (NASDAQ: BABA). This news attracted a large number of investors, increasing the stock price of the Hong Kong unit by nearly 81%.
The healthcare sector is a very promising field in China. The Chinese government spends only 6% of its Gross Domestic Product on healthcare. This is nearly half of what Europe spends on its healthcare sector. The country has numerous health care issues to focus, such as heart diseases and diabetes. Alibaba Group Holding Limited (NASDAQ:BABA) might just be waiting for the government to allow selling of prescription drugs.
The move comes just after the company registered the lowest growth rate of the last three years in the last financial year that ended this march. The company has promptly grabbed the opportunity that will bring sure benefits in near future. It must be noted that the company has only brought the controlling shares of its Hong Kong unit.