Tencent to buy 15% of JD.com to rival Alibaba in e-commerce
Print Edition
Tencent Ltd yesterday said it will pay US$214.7 million for 15 percent of Chinese business-to-consumer website JD.com, in an attempt to reshape the country’s e-commerce industry now dominated by Alibaba Group.
Hong Kong-listed Tencent will sell its e-commerce businesses, including minority stake in Shanghai Icson E-Commerce Development Co (Yixun.com), QQ Wanggou and Paipai, to JD.com. Tencent will increases its stake in JD.com by 5 percent after the latter completes an initial public offering in the United States to raise about US$1.5 billion, according to both parties.
The deal will combine JD.com’s advantage in e-commerce and Tencent’s leading position on social platforms with hundreds of millions of QQ and WeChat users. The huge user base is set to boost traffic to JD.com and Yixun.com.
Industry watchers have surmised that the Tencent-JD.com coalition could be enough to rival Alibaba in more than 20 areas, including mobile payment, e-commerce and O2O (online to offline).
With its strong social and game business, Tencent competes with arch rivals Alibaba on e-commerce and payment and Baidu on search. These top-three Internet giants have acquired companies to offer users better O2O services.
Xu Zhipeng, senior analyst of Zero2IPO Group, feels Tencent has lost patience waiting for its own e-commerce business to flourish. Its websites, including the most popular, Yixun.com, are completely dwarfed by Alibaba’s Taobao.com. Buying into JD.com is a forceful strike at the competitor’s main business, he said.
In other words, by giving up some of its noncore businesses, Tencent has allied itself with the second-best, in a bid to redivide the territory. Tencent has retained a foothold in the web store by allowing JD.com to gain a mere minor stake in Yixun.com, the most lucrative of Tencent’s B2C sites.
Li Hongke, analyst with Haitong Securities, nodded at Tencent’s bold move, saying that without the burden and distraction of its sluggish B2C and C2C service, albeit with a possible 20 percent drop in income, Tencent could concentrate on information services.
The company, which started from online community software QQ, will have more energy to improve the O2O business through communication application WeChat and sharpen up its payment tool, Li added.
Tencent’s share purchase will boost the IPO valuation of JD.com, which has been eying to go public in the US.
In January, JD.com, backed by Russian billionaire Yuri Milner’s DST Global, filed what would be the biggest IPO of a Chinese Internet firm in the US.
(Shanghai Daily/Xinhua)
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