(Updates with comment from analyst in fourth paragraph.)
May 1 (Bloomberg) -- Alibaba Group Holding Ltd., the Chinese e-commerce operator headed for an initial public offering, is in talks to regain a stake in the Alipay payments affiliate, according to a person familiar with the matter.
There is no timeline for an agreement and any deal may not take place until after Alibaba’s IPO, said the person, who asked not to be identified because the discussions are private. Any transaction would be subject to regulatory approval in China, the person said.
Gaining a stake in Alipay would give Alibaba exposure to China’s booming online financial products market and add an income stream from payments processed through its e-commerce platforms. Alibaba said in March it plans an IPO and the company has been valued at $168 billion, according to the average estimate of 12 analysts surveyed by Bloomberg News last month.
“It would be a significant positive to Alibaba’s valuation and its IPO as Alipay is a highly valuable asset,” Jiong Shao, an analyst at Macquarie Group Ltd. in Hong Kong, said by e-mail.
Alibaba transferred Alipay to a Chinese company controlled by its Chairman Jack Ma in August 2010. In 2011, Alibaba reached agreement with its largest shareholders Yahoo! Inc. and SoftBank Corp. on compensation after the ownership change.
A call seeking comment from a representative of Alibaba at its Hangzhou, China headquarters wasn’t answered on a public holiday.
Alipay, an online payment system like EBay Inc.’s PayPal, has more than 550 million registered users and processes about 8.5 million transactions a day, according to its website.
“Alipay is an affiliate of Alibaba Group,” according to its website.
The talks for a stake in Alipay were reported earlier today by the Wall Street Journal.
Alipay’s Internet financing business called Yu’E Bao has drawn deposits from 81 million customers as they chase returns higher than what China’s banks offer and had 541 billion yuan ($86 billion) of net assets under management as of March 31.
In March, China’s central bank blocked plans by Alipay to offer virtual credit cards as the government moves to tighten restrictions on online financial products.
The suspension of virtual credit cards and so-called Quick Response codes is meant to regulate the Internet finance industry and protect consumers, Xinhua News Agency reported at the time, citing Zhou Jinhuang, deputy head of the People’s Bank of China’s payment and settlement department. The virtual cards would have let consumers buy goods from online retail websites on credit.
--With assistance from Chris Shimamoto in Tokyo.