In its bid to provide Alibaba Group Holding Ltd with a stronger rival, Tencent Holdings Ltd has agreed to acquire a 15% stake in JD.com, a Chinese e-commerce platform, Bloomberg reported citing a filing.
The biggest Internet firm in Asia will be buying JD.com for a price tag of $214.7 million. The filing also revealed that Tencent will be selling two e-commerce operations as well as a minority stake in Yixun to JD.com. The e-commerce businesses that Tencent will be offloading are QQ Wanggou and Paipai. Moreover, Tencent will be purchasing another 5% stake in e-commerce retailer after it has gone public, the report said.
In a phone interview, Guotai Junan International Holdings Ltd Analyst Ricky Lai told Bloomberg, "Tencent, by injecting its assets like Paipai into JD.com, can better compete with Alibaba in e-commerce. This is quite a good deal for Tencent."
The agreement will have the more popular market of JD.com consolidating with the lesser-known e-commerce platforms of Tencent. Their combined e-commerce sites will be more able to compete with the largest operator in China, Alibaba. The WeChat messaging service of Tencent will also provide a great boost to JD.com's traffic as it gears up for an IPO in the US, the report said.
JD.com has filed for a $1.5 billion IPO in the US in January. The e-commerce retailer is backed by DST Global and the share sale could be the biggest IPO of a China-based Internet firm in the US. In its IPO filing, JD.com said Tencent's Yixun is going to be one of its rivals in the space. It also cited the China unit of Amazon.com Inc and the Taobao and Tmall platforms of Alibaba as competitors, the report said.
Tencent has been looking for a way to strengthen its e-commerce operations by consolidating messaging with other services such as gaming and shopping. In January, Tencent said it would be investing $193 million to logistics and warehouse owner China South City Holdings Ltd, the report said.
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