Alibaba Sells Stakes In Meituan Dianping
Alibaba reaches a deal valued at $900 million to sell its stakes in Meituan Dianping to a group of investors.
Alibaba Group Holding has reached an agreement to spin off its stakes in Meituan Dianping. It is believed that the Chinese tech giant struck a massive $900 million deal to sell off its stakes in the largest online provider of China’s movie ticketing, restaurant booking, and other services.
People familiar to the matter reported that Alibaba is currently looking to build its own platform that will directly compete against Meituan Dianping in the market. It is expanding its reach in different business categories.
Meituan Dianping was formed in 2015 after the merger agreement of two rival startups. Alibaba Group sold its stakes to a ‘group’ of investors, as reported by sources. The people familiar to the matter further added that the investors who are involved in buying the stake from the Chinese e-commerce giant also participated in the recent $3.3 billion funding round in Meituan Dianping along with other venture capitalists.
Alibaba had its reason to sell stakes in the startup. It is believed that China’s largest provider of on-demand services welcomed Alibaba’s rival, Tencent Holdings, as a shareholder. Now, Alibaba is working on a project named Koubei, which is its own online-to-offline (O2O) platform.
A couple of months ago, the company announced to take an early lead in this market by launching its services. This is the reason for its investment worth $1.25 billion in Chinese food delivery service, Ele.Me. This move came in order to strengthen its O2O market for future.
A group of investors who bought Alibaba’s stakes in Meituan Dianping reportedly paid a discounted price equal to the $12.5 billion valuation of the merger startup ‘compared with the $15 billion price investors paid in the new funding round,’ sources familiar to the matter reported.
The discounted price was due to the company’s old shares having a less ‘downside protection’ rights if compared to the new shares that are currently being sold in the market following the latest funding round.
After the massive $3.3 billion funding round recently, Meituan Dianping is valued at $18.3 billion in the market. Alibaba’s rival, Chinese internet organization ‘Tencent Holdings’ led the funding round along with the participation of venture capital firm, DST Global, and Singapore-based Temasek Holdings Pte. Ltd.
Mr. Jack Ma is ambitious to grow abroad but investors are concerned about the company’s dependence on China. This can hinder its efforts to prosper internationally and limits its global scope.