Chinese e-commerce giant Alibaba is looking to sell its stake in the now merged online-to-offline startup Meituan Dianping. In October, Alibaba-backed Meituan.com agreed to merge with Tencent-backed Dianping.com to rival Baidu’s O2O services. The combined Meituan-Dianping offer movie ticketing, restaurant bookings, group-buying and other on-demand services.
Alibaba’s stake in Meituan-Dianping worth $1 billion
Sources familiar with the situation told The Wall Street Journal that the Hangzhou-based e-commerce giant is looking to sell its 7% stake in Meituan-Dianping for about $1 billion. However, the company may have to settle with a lower amount as investors seek discounts on the e-commerce giant’s stake. That’s because the merged startup is offering a “ratchet” clause to investors in its current funding round.
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The “ratchet” clause gives new investors additional shares if the company’s future IPO is priced below the valuation they pay in the current round. Alibaba’s stake doesn’t offer “ratchet” clause to prospective investors, so they may negotiate a lower valuation for its stake. Meanwhile, Tencent is looking to invest approximately $1 billion in Meituan-Dianping. The merged startup is seeking to raise $3 billion in latest funding round at a post-money valuation of $20 billion.
Focusing on its own platforms
Sources told the WSJ that the Hangzhou-based company is exiting its stake in the startup to focus on its own platforms. Alibaba has been selling movie tickets through its Tmall and Taobao marketplaces for years. Earlier this year, Alibaba Pictures acquired movie ticketing software firm Yueke Software Engineering, which makes theater management and ticket-booking software.
The Jack Ma-led e-commerce giant will also focus on developing its food-delivery platform Koubei, which is a joint venture between Alibaba and its financial affiliate Ant Financial. Though most O2O startups have been burning cash to attract users, giants like Alibaba have deep pockets and supporting services like payment platforms, maps, and data that put them in an advantageous position over competitors. The Hangzhou-based company is confident that its e-commerce dominance would help it succeed in O2O services.