View photosMoreA sign of Alibaba Group is seen at CES Consumer Electronics Show Asia 2016 in Shanghai, China, May 12, 2016.

REUTERS/Aly Song

HONG KONG Reuters - Hong Kong's securities regulator said that Chinese e-commerce giant Alibaba Group Holding Ltd breached takeover rules in the purchase of a healthcare firm in 2014 because it also bought a company owned by the brother of the healthcare firm's vice chairman on "favourable terms."

Alibaba agreed to buy a stake in CITIC 21CN, now known as Alibaba Health Information Technology Ltd , for $170 million two years ago.

Hong Kong's Takeovers and Mergers Panel, part of the Securities and Futures Commission SFC , ruled that Alibaba's purchase of Hebei Huiyan "constituted a special deal with favourable conditions which were not extended to all shareholders and was a clear breach of the Takeovers Code," according to the decision published on Wednesday.

But the e-commerce firm added the regulator issued a new waiver in view of the sharp rise in Alibaba Health stock since 2014, meaning Alibaba is not currently required to launch a full buyout.

Alibaba owns 38 percent of Alibaba Health, but last year injected an online pharmacy business into Alibaba Health.

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