Bottom line: A sudden spate of new mega-fundings by Meituan-Dianping, Lufax and JD Finance show there is still big interest in China’s private tech and finance sectors, despite the nation’s rapidly slowing economy.
It seems I may have been a bit premature with my recent prediction that the mega-fundings that crested in China a year ago were finished. That’s my assessment after reading about 3 new mega-deals in the tech sector this week, all worth more than $1 billion. Leading the pack was recently merged group buying giant Meituan-Dianping, whose whopping $3.3 billion in new funding values the company at $18 billion.
That latest news came just a day after media reported another deal that saw peer-to-peer (P2P) lending giant Lufax just raise its own new funding of $1.2 billion, valuing the firm at $18.5 billion. Last but not least was announcement at the start of the week that the finance unit of e-commerce giant JD.com (Nasdaq: JD) had just raised 6.65 billion yuan, or just over $1 billion, valuing the firm at 46.7 billion yuan ($7 billion).
Anyone with a calculator can do some quick math and determine these 3 companies have just raised a total of $5.5 billion, valuing the trio at a collective $42 billion. I’m not a China financing historian, but this kind of fund raising frenzy in the space of just a few days certainly looks like a record to me for China’s high-tech sector.
So, what’s going on here? The simple answer is that there’s still plenty of private equity looking for investments in China, and that at least for now those investors aren’t worried by the nation’s accelerating economic slowdown. The rapidly liberalizing financial services sector is especially hot, as Beijing accelerates its opening up of an industry that was previously monopolized by state-run companies. Appetite is also strong for a new group of industry leaders formed by a recent series of mega-mergers.
Let’s begin our round-up with the leader, Meituan-Dianping, which was formed last year by the merger between China’s 2 largest group buying sites. (English article; Chinese article) This latest funding round appears to be led by Internet titan Tencent (HKEx: 700), which earlier was reportedly looking to invest $1 billion in the company. (previous post)
Tencent was joined in the funding by a number of other major names, including Russia’s Digital Sky (DST), TBP Capital and Singaporean wealth fund Temasek, just to name a few. The deal appears to give about 5.5 percent of Meituan-Dianping to Tencent, bringing its total stake in the newly merged company to around 15 percent. That would make Tencent the likely candidate to become Meituan-Dianping’s major strategic partner going forward.
Financial Backers for Lufax
Next there’s the Lufax deal, which has seen the P2P lending platform operator raise its latest $1.2 billion from a group that includes a major traditional Chinese financial institutions like Bank of China (HKEx: 3988; Shanghai: 601398), Minsheng Bank (HKEx: 1988; Shanghai: 600016) and Guotai Junan Securities (Shanghai: 601211). (English article; Chinese article)
Lufax also counts financial services giant Ping An as its largest stakeholder, and is quickly emerging as a leader the P2P lending sector that sees such online platforms connect wealthy individuals and investors with borrowers. The company has indicated it plans to make an IPO as soon as the second half of this year, and such a deal would probably raise around $2 billion and get strong interest from investors.
Last there’s the JD.com deal, which has seen the company’s JD Finance unit also raise its 6.65 billion yuan in new funds from a list of big name investors that includes Sequoia Capital and China Taiping Insurance. (company announcement; Chinese article) JD is following most of China’s other major Internet firms into the online finance business, and the clear leader in that space is Alibaba’s (NYSE: BABA) affiliated Ant Financial unit.
The sudden announcement of 3 such major deals is probably at least partly due to seasonal factors, since backers probably wanted to complete the fundings before the Lunar New Year that falls in early February. Still, the sudden spurt of new activity shows there’s still plenty of interest in the China story. Accordingly, it’s quite possible we could see other newly created giants like Didi Kuaidi, the recently formed Uber China and the quasi-merged Ctrip (Nasdaq: CTRP) and Qunar (Nasdaq: QUNR) announce major new capital raising later in 2016.
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