UPDATE: Since originally writing this post, Internet giant Tencent has launched its own buyout offer for eLong. Ctrip has commented that cooperation with Tencent would represent a win-win. (Chinese article)
Bottom line: Ctrip is likely to make a buyout offer for eLong by year-end, but its profits will remain under pressure for at least the next year as it battles with Qunar for market share.
Profits under pressure at the Ctrip lodge
Leading online travel agent Ctrip (Nasdaq: CTRP) has just released its latest quarterly results that show just how fierce competition has become in China’s travel market, as heavy spending eroded its profits despite big revenue growth. That competition was even more evident in the latest results for eLong (Nasdaq: LONG), which was once Ctrip’s main rival but more recently has developed an increasingly cozy relationship with its former foe.
I’ve been predicting for the last few months that Ctrip will ultimately make a buyout bid for eLong, following a steady series of recent moves that were bringing the companies closer together. The announcement of Ctrip’s and eLong’s latest quarterly results on the same day seems like more than coincidence, and is further evidence that a marriage could soon be coming. But before any formal marriage proposal, Ctrip would also be wise to take a long, hard look at eLong’s financials, which don’t look too impressive. Read Full Post…
Bottom line: Ctrip is likely to make a counter-bid for eLong following a surprise offer from Tencent, sparking a potential bidding war that should ultimately see Ctrip emerge as the victor.
Tencent launches surprise bid for eLong
I’ve been predicting for the last few months that leading online travel site Ctrip (Nasdaq: CTRP) would make a buyout bid for former rival eLong (Nasdaq: LONG), so I was quite surprised to read that such a bid has come instead from Internet giant Tencent (HKEx: 700). This particular move is all the stranger because Tencent hasn’t shown much interest in the travel sector before now, though it previously invested in eLong and now owns about 15 percent of the company.
I also have to suspect that this particular bid came without the knowledge of Ctrip, which itself owns 37 percent of eLong. Ctrip got its stake after joining a group that bought out a controlling 62 percent of eLong previously held by US travel giant Expedia (Nasdaq: EXPE) earlier this year. Tencent has owned its stake in eLong since 2011. Ctrip’s recent moves have all pointed to its own buyout offer for eLong, leading me to believe that we could quickly see a bidding war break out for the company. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 5. To view a full article or story, click on the link next to the headline.
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eLong (Nasdaq: LONG) Receives “Going Private” Proposal from Tencent (PRNewswire)
Alibaba Group (NYSE: BABA) Appoints Michael Evans as President (Businesswire)
Qunar (Nasdaq: QUNR) Achieves Record Daily Hotel Room Nights Stayed (GlobeNewswire)
Toyota (Tokyo: 7203) Says Not Optimistic on China Profitability (English article)
PetroChina (HKEx: 857) Wins Dismissal of Securities Lawsuit in US (English article)
Bottom line: The move by a Ctrip vice president to the role of CEO at eLong represents growing ties between the 2 companies, with the former likely to make a buyout offer for the latter within the next year.
Ctrip exec takes over at eLong
A new executive move between online travel leader Ctrip (Nasdaq: CTRP) and the smaller eLong (Nasdaq: LONG) shows the pair of former rivals are moving closer together, hinting at a potential outright merger in the not-too-distant future. Such a merger would have been major news just 5 years ago, when this pair of companies were the 2 clear leaders in China’s online travel sector.
Since then, however, eLong has sputtered under the ownership of US travel giant Expedia (Nasdaq: EXPE), which finally called it quits in May and sold its stake in the Chinese company. (previous post) Ctrip was quick to jump in and purchase 37 percent of eLong for $400 million, and has now moved even closer to its former rival with this new executive move. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 9. To view a full article or story, click on the link next to the headline.
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Group Buying Site Meituan Prepares to Raise $1 Bln, Value Doubles in Half Year (Chinese article)
Alibaba (NYSE: BABA) Increases Investment in Singapore Post by $138 Mln (Chinese article)
The following press releases and media reports about Chinese companies were carried on July 3. To view a full article or story, click on the link next to the headline.
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iQiyi, Ant Financial Picked to Make First IPOs on New Strategic Industries Board (Chinese article)
Alibaba (NYSE: BABA) Said in Talks for More Seattle-Area Office Space (English article)
Xiaomi Sold 34.7 Mln Smartphones In H1 2015, Up 33 Pct Year-On-Year (English article)
China Unicom (HKEx: 763) Makes 4G Service Available to MVNOs (Chinese article)
Qunar (Nasdaq: QUNR) Receives Final Judgment in Its Dispute With eLong (GlobeNewswire)
Bottom line: New fund raising by Ctrip and Tujia looks like far more than either company needs, and is part of a broader wave seeing Chinese Internet sites raise big funds to take advantage of strong investor sentiment.
Tujia raises $250 mln
Someone recently asked me why so many companies in China are currently rushing to raise cash, and, after some quick thought, I provided my best answer: Because they can. That seems to be the mentality among Chinese companies these days, including leading online travel agent Ctrip (Nasdaq: CTRP), which has just issued bonds to raise a cool $1.1 billion in new cash that it really doesn’t need. But that statement isn’t completely true, as Ctrip is in another headline that has it joining in a new $250 million funding round for Tujia, China’s equivalent of Airbnb. Read Full Post…
Bottom line: Qunar’s latest quarterly results show it will continue to spend aggressively and post big losses as it competes with Ctrip, and reflect the fact that its biggest asset is its majority ownership by the cash-rich Baidu.
Qunar spurns Ctrip, raising cash
China’s highly competitive online travel landscape is rapidly shaping up as a two-horse race, with one group centered on industry leader Ctrip (Nasdaq: CTRP) and the other on up-and-comer Qunar (Nasdaq: QUNR), which is controlled by leading search engine Baidu (Nasdaq: BIDU). After Ctrip announced a flurry of major new tie-ups last week, Qunar is fighting back with new fund-raising announcements that include a nearly $1 billion cash injection through the issue of new stock and bonds.
Qunar announced the fund-raising the same day that it released its latest quarterly results, which contained the surprise disclosure that it was approached by Ctrip last month about a merger. It added that it rebuffed the advance, but it clearly needs new funds as its own cash pile remains relatively small and its losses balloon due to aggressive spending. Read Full Post…
Bottom line: Priceline’s new China foray with Ctrip will get off to a positive start, but will run into problems and ultimately collapse due both sides’ inability to gain much from the partnership.
Ctrip boosts Priceline alliance
Just days after global online travel giant Expedia (Nasdaq: EXPE) announced its withdrawal from China, rival Priceline (Nasdaq: PCLN) is moving in the other direction with a significant boost to its partnership with local sector leader Ctrip (Nasdaq: CTRP). I’ve previously been quite skeptical of this particular partnership, after previous similar tie-ups failed due to the fiercely independent nature of Ctrip’s top management. I’m still quite skeptical, though a string of other major tie-ups by Ctrip recently seem to show it’s realizing it needs to be more flexible to fend off the growing threat from fast-rising local rival Qunar (Nasdaq: QUNR). Read Full Post…
Bottom line: Thursday’s hacking attack on Ctrip brings a sour end to its week of major new tie-ups, but isn’t too unexpected for a company of its size and should have a relatively limited impact on its operations and reputation.
Ctrip shut down by hackers
I’ve been writing a lot about leading online travel agent Ctrip (Nasdaq: CTRP) these last few days after it signed a couple of major deals, so it seems fitting that we end the week with news of a major hacking attack that took the company offline for most of Thursday. I’m a longtime user of Ctrip and am generally a big fan of the company, whose good management and focus on its core travel business have allowed it to maintain its market-leading position for a decade despite numerous challenges.
Against that backdrop, this hacker attack seems like a relatively minor issue, though one that could be potentially worrisome as it exposes one of Ctrip’s biggest vulnerabilities. Then again, Ctrip is certainly not the only company to come under such attacks, and many much larger and more experienced western giants like US retailer Target (NYSE: TGT) and Hollywood studio Sony Pictures (Tokyo: 6753) came under much higher-profile and more damaging outside assaults last year. Read Full Post…
Bottom line: Ctrip’s purchase of a controlling but minority stake in eLong is the latest in a string of similar equity tie-ups by the company, none of which looks very exciting because these new partners aren’t interested in working closely with Ctrip.
Expedia sells eLong stake
A longtime but largely empty cross-border Internet partnership has finally come to an end, with word that US online travel agent Expedia (Nasdaq: EXPE) has dumped its stake in Chinese laggard eLong (Nasdaq: LONG). In an interesting twist to the story, the group buying eLong includes Chinese industry leader Ctrip (Nasdaq: CTRP), which seems to be buying small stakes in many of its rivals these days without buying anyone outright.
Personally speaking, I don’t see much reason to get excited about Ctrip’s latest buy, even though investors seemed to think differently. eLong is a perfect example of a company that had huge advantages due to its early arrival to the online travel market and longtime partnership with Expedia. And yet it failed to parlay any of that into a market leading position, and instead has become an afterthought as it got overtaken by younger, more innovative companies like Tuniu (Nasdaq: TOUR) and Qunar (Nasdaq: QUNR). Read Full Post…
