Chinese online retail behemoth Alibaba has reached a deal to sell its entire stake in online-to-offline (O2O) service provider Meituan-Dianping for $900 million. The Hangzhou-based company had been looking to sell its stake since Meituan agreed to merge with Tencent-backed Dianping last year. Instead of owning a minority stake in Meituan-Dianping, the online retailer is keen to focus on its own O2O venture Koubei.

Alibaba Group Holding Ltd Sells Its Stake In Meituan-Dianping For $900M

Alibaba’s shares sold at a discounted rate

Sources familiar with the matter told the Wall Street Journal that Alibaba sold its stake in Meituan-Dianping to a group of investors. Some investors who purchased Alibaba’s stake also participated in Meituan-Dianping’s latest funding round of $3.3 billion. The merged entity was valued at $15 billion in its recent fundraising round. But Alibaba’s shares were sold at a discounted price that would suggest a valuation of $12.5 billion for Meituan-Dianping.

That is because the Hangzhou-based company’s shares do not offer the same downside protection rights that investors got in the recent funding round. The downside protection rights give investors additional shares if the company’s future IPO is below the valuation they paid in the latest round. Meituan-Dianping is China’s largest provider of O2O services such as restaurant bookings, movie ticketing, concert ticketing, and other on-demand services.

Meituan has 150 million monthly active users

Meituan said Tuesday that its total transaction volume was $25.84 billion last year. It boasts of 10 million daily orders and 150 million monthly active users. Sources told the Wall Street Journal that the Jack Ma-led company wanted to refocus on Koubei because it is one that Alibaba can fully control. Koubei, a joint venture between Alibaba and its financial affiliate Ant Financial, was launched in June last year.

Chinese Internet giants Alibaba, Tencent and Baidu have been investing aggressively in O2O services as more Chinese consumers use smartphone apps to avail offline services. All three are confident that they can win in the fiercely competitive market where many startups have burned out in the discount war. Alibaba has an edge over rivals, thanks to its deep pockets and supporting services such as payment platforms, data, and maps.