Chinese e-commerce company JD.com is reportedly looking to expand its financial services operations with the purchase of a stake in Sinolink Securities.
The e-commerce major is pursuing talks to acquire part or all of the stake in the brokerage worth at least $1.5bn, Reuters reported citing people familiar with the matter.
Shanghai-based Yongjin Group is the largest shareholder in Sinolink, which offers securities brokerage, asset management, fixed income, equity investment, and investment banking services.
According to sources, JD, which is seeking to obtain part or all of Yongjin’s 27% holding in the brokerage, began its discussion with the firm towards the end of the last year.
The deal, if materialises, would be JD.com’s biggest bet in China in terms of the acquisition value.
“The valuable brokerage licence is key for tech giants to monetise their huge online traffic and grow into bigger firms, as otherwise, they have to direct such traffic to other financial institutions,” a source told the news agency.
Sinolink was valued at $6bn (RMB 39bn) as of last Thursday. According to Reuters calculations, JD.com should pay around RMB10bn to obtain a 27% stake.
The sources revealed that the potential deal follows Chinese tech majors’ move to expand into financial services despite a regulatory crackdown on some areas of the sector.
They added that the firm has been seeking to expand into the brokerage industry, which was worth $1.4trn as of the end of the last year, for quite some time now.
JD.com garner the majority of its revenue from its e-commerce business. The firm, which owns only a number of small financial licences, provides online services including consumer credit and wealth management products.
Meanwhile, Chinese tech giants Alibaba and Tencent hold stakes in the investment bank China International Capital.
In addition, Alibaba has holdings in broker Huatai Securities while Hong Kong-based online brokerage Futu is backed by Tencent.