China’s Groupon, Meituan today confirms the merger with China’s Yelp, Dianping. The two of China’s leading group buying platforms, were reported yesterday to have agreed on a deal worth of a dozen of billion dollars.
The new company will occupy 80% of China’s group purchase market, becoming the biggest O2O platform in China, according to Tencent Tech.
Current shareholders in Meituan and Dianping will see their interests invested into a new company established outside of China’s borders, maintaining their variable interest entity (VIE) structure at a ratio of 7:4, Sina said. Another report from Businessweek indicates that the ratio might even be closer to 5:5 instead of 7:4.
The structure implies that Dianping may temporarily pause its plan to list on China’s mainboard. Huang Yuanpu, the CEO of the O2O-focused media company Iyiou.com, commented that the valuation of Meituan and Dianping’s new company will not surpass USD 15 billion and will be less likely to quickly go public in the nearer future.
Meituan and Dianping will adopt the model established by Didi Dache and Kuaidi Dache by having two CEOs. Wang Xing, CEO of Meituan, and Zhang Tao, CEO of Dianping, will take charge of different businesses and both report to the new board independently. The new company will have dual headquarters in Beijing and Shanghai.
Sina Tech comments that given Meituan’s possibly bigger share in the new company and the more assertive style of its CEO, Wang Xing, it’s very likely Dianping’s team will withdraw from the new administration pretty soon.
According to the statement, after the merger, Meituan and Dianping will maintain the independency of both brands and related businesses, similar to Didi Dache and Kuaidi Dache’s model.
Baidu’s O2O subsidiary, Nuomi, will likely present the strongest competition to the new company. Baidu invested RMB 20 billion (USD 3.17 billion) in Nuomi this year.
Sequoia Capital, a significant investor in both Meituan and Dianping, will become the primary investor in the new company after the merger, holding a bigger share than both Alibaba and Tencent. Boutique investment bank, China Renaissance, responsible for arranging the merger between Didi Dache and Kuaidi Dache, will oversee as the financial advisor for the merger.