Tencent to buy 15 pct stake in JD.com in challenge to Alibaba

March 13, 2014 Leave a comment

Tencent to buy 15 pct stake in JD.com in challenge to Alibaba

9:58pm EDT

* Tencent buys 15 pct stake in e-commerce firm JD.com for $215 mln

* Plans to buy additional 5 pct stake on post-IPO basis

* Investment will challenge China’s No. 1 e-commerce firm Alibaba

* JD.com e-commerce business to be integrated with Tencent’s WeChat

By Paul Carsten

BEIJING, March 10 (Reuters) – Tencent Holdings Ltd will buy a 15 percent stake in e-commerce firm JD.com for $214.7 million, as the two seek to challenge Alibaba Group Holding’s dominant position in online shopping in China.

The move comes ahead of JD.com‘s planned $1.5 billion U.S. listing of its shares and is set to further increase the appeal of the country’s No. 2 e-commerce firm to investors.

Tencent also plans take an additional 5 percent of JD.com on a post-IPO basis, and Tencent President Martin Lau will take a seat on JD.com‘s board of directors.

Although Alibaba is by far China’s most dominant e-commerce firm, it has been losing ground to Tencent on mobile as smartphone and tablet usage has surged over recent years.

JD.com has grown sharply in recent years and said in December it would top its 100 billion yuan ($16.3 billion) annual sales target in 2013.

Under the agreement, JD.com will take control of Tencent’s own, unsuccessful e-commerce businesses, which will be 100 percent owned by JD.com. Tencent Digital, Tencent E-Commerce, Yixun Logistics and Tencent Guangzhou will all cease to be subsidiaries of Tencent.

Tencent said it would integrate JD.com with its hugely popular WeChat mobile messaging app, known as Weixin in China, which is increasingly offering other services like online payment, taxi bookings and even wealth management products.

“Our strategic partnership with JD will not only extend our presence in the fast-growing physical goods eCommerce market, but also allow us to better develop our enabling services such as payment, public accounts and performance-based advertising network to create a more prosperous ecosystem for overall eCommerce activities on our platforms,” Martin Lau said in a statement.

China’s business to consumer e-commerce sales may pass $180 billion this year due to rising Internet usage, expanding middle-class incomes and a better distribution network, according to New York-based market research firm eMarketer.

Alibaba is expected to go public later this year in the world’s biggest listing since Facebook Inc’s debut in 2012, with the value of the IPO seen at around $15 billion.

Its Tmall marketplace controls at least half of China’s online retail sales and its eBay-like Taobao controls around 80 percent of consumer-to-consumer online sales, according to data from Euromonitor.

Bank of America Merrill Lynch and China Renaissance acted as JD.com‘s financial advisers, while Barclays Bank PLC advised Tencent.

 

Tencent Appoints Barclays to Advise on JD.com Stake Buy

An Operational Tie-Up Between the Two Firms Could Create a Strong Competitor to Alibaba

CYNTHIA KOONS

Feb. 27, 2014 12:57 a.m. ET

HONG KONG—Chinese social networking and gaming company Tencent Holdings Ltd.TCEHY -2.27% has appointed Barclays BARC.LN -1.95% PLC to advise it on a potential purchase of a stake in JD.com Inc., formerly called 360Buy, amid a flurry of deals among Chinese Internet companies, a person familiar with the matter said Thursday.

Chinese online retailer and e-commerce firm JD.com is currently preparing for a $1.5 billion U.S. listing, ahead of a much-anticipated listing by bigger rival Alibaba Group Holding. Alibaba has talked to exchanges in both Hong Kong and New York, but says that it has yet to decide where it will list or when. While it is unclear how much Alibaba will seek to raise, its listing is likely to value the company at more than $100 billion, analysts say.

An operational tie-up between Tencent and JD.com could create a strong competitor to Alibaba, which has thus far dominated China’s e-commerce market. Tencent is best known for its WeChat messaging service, which has more than 272 million monthly active users, mainly in China. Tencent is trying to expand WeChat abroad, challenging Silicon Valleys’ WhatsApp, which has 450 million users. FacebookFB -1.47% recently bought WhatsApp for $19 billion.

Tencent’s presence in e-commerce is small compared with rival Alibaba, but an alliance with JD.com could create a bigger player. JD.com, like Amazon.com Inc., AMZN -0.03% is a direct seller of goods, while Alibaba runs eBay EBAY -0.40% -like online marketplaces where many merchants sell items directly to customers. Tencent could turn WeChat’s vast user base into a platform for offering other services such as mobile shopping, analysts say, and a partnership with JD.com could provide Tencent with more resources in running e-commerce operations.

JD.com filed for an initial public offering in the U.S. in January, capitalizing on improving investor sentiment for Chinese tech stocks. U.S.-listed Chinese Internet stocks like BaiduInc. BIDU -1.41% and Hong Kong-listed Tencent have enjoyed strong gains in the past year.

As of the end of September, JD.com had 35.8 million active customer accounts, the company said in its filing with the U.S. Securities and Exchange Commission.

 

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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