Previous Story
Besties? Why Alibaba, Tencent are teaming up in $15 billion deal
Posted On Oct 09 2015
Comment: Off
Meituan.com and Dianping.com will pool resources and cease a margin-eroding price war.
Wang Xing, CEO of Tencent-backed Meituan and Zhang Tao, CEO of Alibaba-backed Dianping, will be co-chairman and co-CEO of the new company. The deal creates a dominant player in China’s online-to-offline services market, as consumers increasingly use smartphones and tablets to book everything from hotel rooms to vehicle rides to grocery deliveries. We announced that we’re spending $3.2 billion over the next three years on Nuomi. In the current deal, Meituan’s shareholders will own about 60 percent of the combined company, which will be valued at about $15 billion, the people familiar with the matter said, asking not to be identified because the matter is private.
“The external competition is fierce and the business is constantly changing, yet O2O is just getting started”, Meituan’s Wang said in a statement posted on the company’s Weibo microblog.
It’s not the first time Alibaba and Tencent have worked together.
Spokesmen for Alibaba, Dianping and Meituan declined to comment. At first each had backed a different startup in this area, but when Baidu gave financial backing to Uber, an American taxi-app giant, to expand its presence in China, Alibaba and Tencent merged their proxies into a firm now called Didi Kuaidi.
A larger, more established player can pursue more avenues for capital-raising. Many Web startups that had been burning cash through big incentives to draw customers are facing pressure to cut their losses. Even more striking is news this week of a merger between the two biggest Chinese firms in the business, which may herald a broader consolidation in China’s internet sector.
Interestingly, this deal once again sees foes Alibaba and Tencent hold investment in the same company.
Meituan is a group-buying site, while Dianping is a restaurant review app. The two groups account for an estimated 70% of the online-to-offline services market in China, now worth 77bn yuan.
