Bottom line: A new landscape in China’s O2O restaurant services market is taking shape around the “big 3” firms of Alibaba, Baidu and Tencent, with a Tencent-backed Meituan-Dianping the most likely to succeed.
Alibaba eyes Ele.me stake
We’re seeing more signs of a major shuffle in the China market for online-to-offline (O2O) dining services, with e-commerce leader Alibaba(NYSE: BABA) at the center of 2 major new developments in the space. One would see Alibaba invest $1.5 billion for about a third of Ele.me, the leader in O2O takeout dining services. The other has media reporting that Alibaba is looking to sell its 7 percent stake in Meituan-Dianping, China’s recently formed leading group buying site that operates a rival takeout dining service.
The big driver behind both of these stories is a major consolidation taking place in the O2O marketplace, where money-losing companies are suddenly scrambling to find wealthy backers after being cut off by their more traditional funding sources. Many of those companies have found a receptive audience from China’s cash-rich “big 3” Internet titans of Alibaba, Tencent(HKEx: 700) and Baidu (Nasdaq: BIDU). Read Full Post…
Bottom line: Reports of a recent spat between Meituan and Alibaba are probably exaggerated, but do point to growing tensions that could ultimately prompt Alibaba to sell its small stake in Meituan.
Alibaba, Meituan clash in takeout dining
Everyone is trying to interpret whether a split is imminent between e-commerce leader Alibaba (NYSE: BABA) and leading group buying site Meituan, following a flurry of reports about a spat between the pair over the past few days. The situation is casting a spotlight on the massive web of cross-ownership relationships between many of China’s Internet companies, which is creating odd bedfellows and other conflicts as a wave of mega mergers has swept China’s Internet over the last 2 years.
In this case the conflicts are coming on 2 fronts. The larger of those is related to Meituan’s pending mega merger with archrival Dianping, in a deal announced last month. That union also brought together China’s 2 largest Internet companies in another odd partnership, since Meituan is partly owned by Alibaba and Dianping counts Tencent(HKEx: 700) as one of its largest investors. Read Full Post…
Bottom line: Tencent’s recent cash-raising frenzy probably signals a major equity investment coming in the next few months, with a merged Meituan-Dianping or Activision as the most likely targets.
Tencent raises more cash via syndicated loan
Tencent(HKEx: 700) may be the lowest-key of China’s big 3 Internet companies, but the company has been far louder on the money- raising scene by borrowing billions of dollars in cash lately. The social networking (SNS) giant has raised billions through a series of bond issues over the last year, and now looks set to raise another $1.5 billion through a syndicated loan that it’s reportedly negotiating with several major western lenders.
All this raises the question of what exactly Tencent is targeting with all the new cash. The company has been the least acquisitive of China’s big 3 Internet companies, which include itself, Alibaba(NYSE: BABA) and Baidu(Nasdaq: BIDU), amid a major consolidation in China’s Internet over the last 2 years. Read Full Post…
Bottom line: Tencent’s latest plan to invest $1 billion in Meituan-Dianping looks like an awkward bid for control of the newly merged company, which could attract a rival bid from Alibaba.
Tencent as awkward suitor
Social networking giant Tencent(HKEx: 700) has never been very good at public relations, unlike slicker Internet rivals Alibaba(NYSE: BABA) and Baidu (Nasdaq: BIDU), whose founders are much better at wooing the media and investors. That refrain is ringing true once again with the latest mega-investment headlines, which appear to show Tencent making an awkward bid for the newly formed group buying giant created by the merger between former rivals Dianping and Meituan.
In fact, Tencent isn’t really bidding for the new company outright, but appears to be voicing its future intent by offering the merged company $1 billion in new funding. Such a funding would boost Tencent’s current equity in the merged company, in which it already holds a stake following its purchase of 20 percent of Dianping last year for $400 million. Such a bid would seem like a direct challenge to Alibaba, which also holds a relatively large stake in the newly merged company through its participation in a $300 million funding round for Meituan last year. Read Full Post…
Bottom line: Weak share reaction to Ming Yang’s new buyout offer and a low valuation for Giant Interactive’s China backdoor listing reflect weakening investor sentiment towards poorly performing Chinese Internet companies.
Chilly reaction for Ming Yang buyout plan
After a brief period of relative quiet, movement is picking up again in the tide of Chinese companies privatizing from New York to re-list back in China. This time former new-energy high flyer Ming Yang (NYSE: MY) announced it has received a management-led buyout offer, becoming the latest firm to receive such an offer. Meantime in China, one of the earlier firms to privatize, gaming company Giant Interactive, has taken the latest step for a backdoor listing in Shenzhen using a shell company called New Century Cruises. (Shenzhen: 002258).
But in an interesting twist to the homeward migration story, a chilly reception from investors seems to reflecting shriveling interest in these poorly performing Chinese companies. In the Giant story, the proposed new valuation for the company looks quite low — far less than what Giant was worth when it de-listed from New York in 2013. That’s quite a switch from what Giant’s talkative chief was saying just 4 months ago, when he boasted his company might be able to get valued as much as 5 times the $3 billion it was worth when it was still listed in New York. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 3. To view a full article or story, click on the link next to the headline.
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Tencent (HKEx: 700) Plans $1 Bln Investment in New Meituan-Dianping (English article)
HSBC (HKEx: 5) Targets Chinese Bond Market with Securities JV (English article)
Gaming Firm Giant Interactive to Backdoor List Through New Century Cruise (English article)
Ming Yang (NYSE: MY) Announces Receipt of “Going Private” Proposal (PRNewswire)
Baixing.com Submits Filings, Aims for Year-End IPO on China’s OTC Board (Chinese article)
Bottom line: The equity tie-up between Ctrip and Qunar is likely to be an uneasy one driven by necessity rather than desire to work together, and stands a 50-50 chance of ending in divorce.
Ctrip, Qunar get hitched … sort of
The year 2015 will go down in Chinese Internet history as the year of the uneasy partnership, as several pairs of former foes suddenly merged even as their outspoken heads refused to work together. The latest of those unions is seeing former bitter rivals Ctrip (Nasdaq: CTRP) and Qunar(Nasdaq: CTRP) get together in a quasi marriage that qualifies as the largest and also strangest union to date.
This particular union isn’t even really a true marriage, and instead is a very big equity swap that will see Qunar’s controlling stakeholder Baidu(Nasdaq: BIDU) get 25 percent of Ctrip. Ctrip will get a larger chunk of Qunar on a percentage basis, ending up with 45 percent voting interest in its former rival. (Baidu announcement; English article; Chinese article) Like the other odd marriages this year, this latest one looks set for troubles, and could stand a very real chance of divorce. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 21. To view a full article or story, click on the link next to the headline.
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Yum Brands (NYSE: YUM) to Separate China Unit Amid Activist Pressure (English article)
Meituan, Dianping Said Seeking to Raise Up to $3 Bln (English article)
The following press releases and media reports about Chinese companies were carried on October 9. To view a full article or story, click on the link next to the headline.
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China RE Sets Price Range for $2 Bln HK IPO; to Launch Deal Monday – Source (English article)
Update: An official at an investment firm involved in the deal confirmed to YCBB that the merger talks are happening.
Bottom line: The merger of Dinaping an Meituan will make uneasy in-laws of Tencent and Alibaba, and will likely be followed within a year by a buyout by one of the partners or IPO for the new company.
Meituan, Dianping in uneasy union
The headlines are buzzing today with word of an imminent merger between leading group buying sites Dianping and Meituan on this first day back to work after the week-long National Day holiday. The deal is certainly a landmark one, as it will create a clear leader in the emerging category of online-to-offline (O2O) companies that bring together the convenience of Internet buying with offline products and services like restaurant dining, going to the movies and hailing a taxi.
Some media are pointing out the merger will pose a major new challenge to the aggressive O2O aspirations of Baidu (Nasdaq: BIDU), which is pouring hundreds of millions of dollars into building out its own rival services. But for me, this particular marriage represents the latest chapter of an increasingly close but also uncomfortable alliance between the country’s other 2 Internet giants, Tencent (HKEx: 700) and Alibaba (NYSE: BABA), which are major stakeholders in Dianping and Meituan, respectively. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 6-8. To view a full article or story, click on the link next to the headline.
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Meituan, Dianping in Merger Talks – Source (Chinese article)
Apparel, Footwear Industry Calls for Taobao Relisting as “Notorious Market” (press release)
China to Hasten Roll-out of Car Charging Network: Xinhua (English article)
Yum’s (NYSE: YUM) China Missteps Amplify Calls For Spinoff, Other Change (English article)
Canadian Solar (Nasdaq: CSIQ) Closes Purchase of Ontario Assets from KKR (PRNewswire)
