Chinese Startups Near Merger in Deal Worth Over $15 Billion
October 06 2015 - 11:10PM
Dow Jones News
HONG KONG—Two of China's biggest tech startups are nearing a
merger worth more than $15 billion, creating the country's biggest
online-to-offline provider of services ranging from movie tickets
to restaurant bookings, according to people familiar with the
situation.
Rivals Meituan.com, China's version of Groupon.com, and
restaurant-review app Dianping Holdings Ltd. are nearing a deal to
merge that would create a company with a combined value of more
than $15 billion, according to the people. The deal by the two
startups, already worth billions of dollars through several rounds
of funding, could be announced in the coming days, according to one
of the people.
The deal brings together two rivals backed separately by Chinese
Internet giants Alibaba Group Holding Ltd. and Tencent Holdings
Ltd. and follows a template set out by the $6 billion combination
of the two rival taxi-hailing services separately backed by the
Chinese Internet giants in February. After the two rival taxi apps
combined to form Didi Kuaidi Joint Co., the new company was able to
raise $3 billion from investors at a $16 billion valuation.
Investors in Meituan and Dianping are hoping for a similar
result as the two companies specializing in deals for restaurants,
movie tickets, and other offline services turn from competing
against each other to taking on Chinese online search giant Baidu
Inc.'s group-buying platform Nuomi. Baidu said in June it planned
to invest $3.2 billion in Nuomi over the next three years as the
online search engine pivots its business model toward connecting
online users with offline services.
The combined Meituan.com and Dianping will present a more
formidable competitor to Baidu. The competing platforms have spent
aggressively to attract merchants and consumers, burning cash in
the process. Meituan and Baidu executives have said that commission
rates, also known as "take rates," range between 2% and 5%. The
executives have said they need to raise those rates to between 5%
and 7% in the longer-term to be able to make money.
Putting the two companies together would be the biggest deal in
a series of Chinese Internet consolidations this year. Many Chinese
tech entrepreneurs have expanded their startups by aggressively
providing subsidies to users and merchants to gain scale, wiping
out competitors that don't have access to capital. That model has
whittled down the field of competitors in many segments of the
Chinese Internet to a handful of well-funded competitors.
Write to Rick Carew at rick.carew@wsj.com and Juro Osawa at
juro.osawa@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 06, 2015 23:55 ET (03:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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