E-commerce giant Alibaba Group Holding Ltd. will compete with China’s leading online provider of movie ticketing, restaurant bookings and other on-demand services after selling its stake in the company.
Alibaba is selling its roughly 7 percent stake in the company created by last month’s merger of rival startups Meituan.com and Dianping Holdings Ltd, whose respective group-buying and restaurant-booking services are similar to those of Groupon Inc. and Yelp Inc. of the US
The Alibaba deal could be worth roughly US$1 billion, based on the valuations being discussed in Meituan-Dianping’s current fundraising round, the people said.
Rather than hold on to its small stake in Meituan-Dianping, Alibaba wants to focus its efforts on developing its own food-delivery platform, Koubei, because it is one that the e-commerce company can fully control, the Wall Street Journal reports.
Koubei, which means “word-of-mouth reputation” in Chinese, is a joint venture set up in June by Alibaba and its financial affiliate, which together injected nearly US$1 billion into it.
One person said investors are seeking a discount on Alibaba’s stake because Meituan-Dianping is offering investors a “ratchet” clause in its continuing fundraising round.
That means investors would be given additional shares if the company’s future initial-public-offering price is below the valuation they pay in this current round. Alibaba’s stake doesn’t offer a prospective buyer those same terms.
Alibaba’s move to exit its investment in Meituan-Dianping comes as rival Chinese internet company Tencent Holdings Ltd. is planning a US$1 billion investment in Meituan-Dianping.
Meituan-Dianping is raising fresh funds from investors to finance its expansion plans. The company has been seeking to raise as much as US$3 billion from investors, putting it at a roughly US$20 billion valuation including the fresh capital, people familiar with the situation said earlier.
The discussions are fluid and the valuations could change depending on investor interest and terms offered.
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