Tencent Tech leaked a document Tuesday morning alleging that China Internet Plus Holdings Ltd (CIP), the giant new merged entity of a classifieds/on-demand services platform, Meituan and Dianping, has raised USD 2.8 billion for a valuation of USD 15 billion.
Around noon, Meituan told Chinese tech website TechWeb that they can’t confirm details but that they may release updates on the matter
Based on fundraising documents Tencent Tech have attained, Meituan Dianping plans to raise USD three billion via issuing Class B preferred shares, which will occupy 16.67% of the total shares of the new company after this round of funding. The valuation will then be expected to increase to USD 18 billion.
The document indicates the new combined entity will take up over 80% of China’s online-to-offline service market. The new entity is estimated to have had a GMV of around RMB 184.8 billion (USD 28.8 billion) in 2015.
Chinese tech giant Tencent, Russian venture capital fund Digital Sky Technology (DST), American venture capital fund Sequoia Capital, Chinese state-backed investment bank China International Capital Corp (CICC) and China-focused international venture capital fund Capital Today, all participated in this round of funding.
The document shows that Tencent, as previously rumoured, will invest USD one billion in the new entity. The industry giant invested in Dianping in 2014 in exchange for 20% of the O2O platform’s shares.
Sequoia Capital participated in Meituan’s first three rounds of funding and Dianping’s first four rounds of funding. According to Tencent Tech, Sequoia Capital will invest another USD 150 million in the new company. The venture capital fund is now believed to be one of the biggest shareholders of the new entity.
With support from existing shareholders, the new company plans to go public in two to three years following this round of funding. Based on the valuation adjustment mechanism of this round of funding, investors participating in this round of funding will be guaranteed at least 20% profit if the company goes public or will be prioritized for a 120% return in case of a clearing or M&A.
Alibaba is believed to be selling, the 7% of Meituan shares it holds now, at a price lower than the new company’s current valuation. The shares Alibaba holds however aren’t protected by the same preferred terms as the shares issued this round.
Alibaba participated in Meituan’s B and C-series funding in 2011 and 2014 but then invested RMB six billion (USD 937 million) in Koubei, an O2O platform it acquired four years ago, in June. It’s rumoured that Meituan CEO Wang Xing and Alibaba had a huge falling out over control of Meituan.
Meituan and Dianping merged in October this year. The new company recently announced its new structure with Wang Xing, ex-CEO of Meituan, as CEO and Zhang Tao, ex-CEO of Dianping, as Chair of the Board. at the recent World Internet Conference in Wuzhen Wang announced that the company had successfully raised funds and would make a public announcement soon.