Meituan Is Said to Buy Bike Startup in $3.4 Billion Deal

(Bloomberg) -- Meituan Dianping, the Chinese food review and delivery giant, is acquiring Mobike in a deal that values the three-year-old bike-sharing startup at about $3.4 billion, according to people familiar with the matter.

Meituan has agreed to buy full control of Mobike, whose current chief executive officer will keep operating the business as an independent entity, Meituan said Wednesday without divulging details. The deal values the bike-sharing firm's equity at about $2.7 billion, and Meituan will assume roughly $700 million in debt, said one of the people, asking not to be identified because the matter is private. Sixty-five percent of the purchase will be in cash, mostly to Mobike management, and 35 percent will be in stock so Mobike investors become Meituan shareholders, the person said.

The acquisition thrusts Tencent Holdings Ltd. to the forefront of two key markets in direct opposition to Alibaba -- on-demand delivery and bike-sharing -- and could escalate an ongoing battle between some of the world's biggest internet companies. In bike-sharing alone, Alibaba Group Holding Ltd. backs Mobike's main rival Ofo, while car-hailing giant Didi Chuxing, backed by SoftBank Group Corp. has begun investing heavily in the same space.

Meituan itself, formed by a merger with Dianping, has grown into a super-app offering everything from group-buying deals and ride hailing to travel packages and payments. With a few taps to navigate its smartphone apps, Chinese customers can order up hot meals, groceries, massages, haircuts and manicures at home or in the office.

“It's quite positive for Meituan, as now it fully covers local services of all aspects,” said Zhou Xin, President of Beijing-based internet consultancy Jkinvest Bigdata. “A lot of Mobike and Meituan's users don't overlap so this broadens Meituan's userbase.”

“Meituan is becoming a significant force in itself. Yes, it still belongs to the Tencent camp. But within camps, Meituan is also trying to build its own ecosystem,” he added.

China Renaissance acted as the adviser for Mobike, which was most recently valued at $3 billion, according to researcher CB Insights. It's unclear whether all its management will remain on board: on Wednesday, Mobike co-founder Hu Weiwei posted on her personal WeChat and included a link to the Nine Inch Nails song “The Beginning of the End”.

“There's no ‘ouster' - from my perspective it's a new beginning,” she wrote.

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Meituan has begun discussions to go public in Hong Kong as soon as this year and is targeting a valuation of at least $60 billion, people familiar with the matter have said. The company is considering listing its shares in China as well if policies allow.

Its primary competitor is Ele.me, a similar provider of local services owned by Alibaba. Mark Natkin, managing director of Beijing-based Marbridge Consulting, said the deal would help Meituan achieve its goal of producing a super-app that caters to a swathe of user needs. That in turn helps boost usage of online payments, a field currently dominated by Alibaba-backed Ant Financial and Tencent's WeChat.

While the price paid for Mobike may seem high considering the lack of a longer track record, Natkin said China's internet market was dominated by players like Tencent and Alibaba who're willing to pay a premium for potential break-out firms.

“It's not a cheap deal but it's a key time in the development of the bike-sharing business to pick a winner and get behind it,” he said.

Read more: Tencent Backed Super-App Emerges to Rival its Own WeChat

--With assistance from David Ramli

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net.

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan

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