19 September 2019
Tencent has offered to invest US$1 billion in the firm created by the merger of Dianping (left) and Meituan. Photo:
Tencent has offered to invest US$1 billion in the firm created by the merger of Dianping (left) and Meituan. Photo:

Tencent makes awkward bid for Meituan-Dianping

Social networking giant Tencent Holdings Ltd. (00700.HK) has never been very good at public relations, unlike slicker internet rivals Alibaba Group Holding Ltd. and Baidu Inc., the founders of which 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 firm outright but appears to be voicing its future intent by offering the merged company US$1 billion in new funding.

That injection of cash would boost Tencent’s equity in the merged company, in which it already holds a stake after buying 20 percent of Dianping last year for US$400 million.

Such a bid would seem like a direct challenge to Alibaba, which also holds a relatively large stake in the merged company through its participation in a US$300 million funding round for Meituan last year.

If all this sounds a bit confusing, that’s because the recently announced mega-merger between Dianping and Meituan is a bit of a mess itself.

The pair were bitter rivals that each raised about US$800 million in separate fundings over the last year in their fierce fight for market share.

Meituan was reportedly in the midst of raising another US$1 billion or more when the pair suddenly announced their merger last month.

Observers said the sudden shift was prompted by both companies’ need for cash to bankroll their fierce competition, and the fact that investors didn’t want to give the pair any more money at the valuations they were seeking.

Against that backdrop, it’s not surprising to read that the new company still needs cash, though it’s somewhat unexpected that Tencent is stepping up to provide most or all of the funds.

According to the latest reports, Tencent is close to a final deal to invest the US$1 billion, which would give the new Meituan-Dianping a valuation of about US$20 billion.

The reports add that Tencent’s investment could be part of a larger funding round in which Meituan-Dianping would ultimately raise as much as US$3 billion.

At the US$20 billion valuation, the investment would presumably buy Tencent another 5 percent of the merged company.

Presuming it already owns about 10 percent of Meituan-Dianping through its previous investment, that would bring its total stake in the merged company to about 15 percent, probably making it the largest individual stakeholder.

The latest reports don’t mention Alibaba at all, and it appears that Tencent is making the investment without consulting China’s e-commerce leader.

While 15 percent certainly isn’t anything close to total control, Tencent’s move certainly seems to indicate it wants to become Meituan-Dianping’s major strategic partner, even if it doesn’t try to acquire the company outright.

Such an arrangement would be similar to Tencent’s deal last year with Alibaba rival

In that deal, JD sold 15 percent of itself to Tencent, which went on to make JD the preferred e-commerce company on its wildly popular WeChat instant messaging service.

This latest awkward bid by Tencent looks similar to a privatization bid it made in August for eLong, a former leader in China’s online travel space that has fallen on hard times in recent years.

In that instance, Tencent launched its privatization drive although eLong’s largest stakeholder was already sector leader Ctrip.

It later became clear that Tencent launched its bid without consulting Ctrip, though Ctrip quickly said it believed the pair could work together.

All of this brings us back to the issue of how Alibaba is likely to respond to Tencent’s clumsy attempt to win control over Meituan-Dianping.

Alibaba chairman Jack Ma Yun is quite an aggressive person and wants to build up his own empire in the online-to-offline services space, which is where Meituan-Dianping is a clear leader.

I doubt he will just sit back and let Tencent become the company’s exclusive strategic partner.

If that’s the case, we could soon see some fireworks from China’s two largest internet companies, as each attempts to exert control over the country’s new group-buying leader.

Bottom line: Tencent’s latest plan to invest US$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.

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A commentator on China company news and associate professor in the journalism department of Fudan University in Shanghai. Follow him on his blog at