China's Dalian Wanda group and Tencent Holdings Ltd (0700.HK) said on Friday they would set up a 5 billion yuan ($814 million) e-commerce joint venture with Baidu Inc (BIDU.O), as the firms push into the high-growth e-commerce sector.
The joint venture, to be registered in Hong Kong, will be 70 percent owned by privately-held Wanda, while Chinese internet giants Tencent and Baidu will hold 15 percent respectively, Wanda and Tencent said in separate press releases.
China is the biggest e-commerce market in the world, with its No. 1 player, Alibaba Group Holding Ltd [IPO-BABA.N], transacting more goods than Amazon.com Inc (AMZN.O) and eBay Inc (EBAY.O) combined.
By teaming up with Tencent and Baidu, Wanda will become the biggest online-to-offline e-commerce platform in the world, said Dong Ce, the chief executive of the new venture. Online-to-offline, or O2O, involves people using their smartphones to find and purchase goods and services, often physically close to them.
"O2O is the biggest pie in e-commerce ... this is just the beginning," said Wang Jianlin, chairman of Wanda and China's wealthiest man with a net worth of $16 billion, according to Forbes.
The tie-up will also vie with Alibaba for a slice of that growing pie. The Tencent and Baidu rival is also quickly ramping up its mobile e-commerce and O2O offerings.
In the April-June quarter, Alibaba's mobile revenue was roughly a third of its total transaction volume, up from 27.4 percent in the first three months of the year.
The deal is structured over three years, Tencent said. The initial investment by the three firms will amount to 1 billion yuan, the company said.
"Within five years the total investment will be around 20 billion yuan," Wang said. "We will bring in new investors to increase the cash flow."
Wanda, which bought U.S. cinema operator AMC Entertainment Holdings Inc (AMC.N) in 2012, is a commercial property, luxury hotel and film conglomerate.
The Beijing-based company said the joint venture, which Wanda has not yet named but was referred to as Wanda e-commerce, will set up e-commerce services in its 107 commercial real estate properties throughout China this year.
By 2015, the conglomerate will have established these services in all of its shopping malls, hotels and holiday resorts, Wanda said.
LET'S GET DIGITAL
Social media and video games giant Tencent and Baidu, China's dominant search engine, will help the tie-up build internet finance and payment products, big data services and customer account and membership systems.
For Tencent, the deal will give them an opportunity to expand their online payment services into the new e-commerce company and Wanda's existing properties, the company said.
"The three partners will further deepen collaboration on initiatives such as traffic sharing, media and advertising resources sharing, membership benefits, payment and internet finance, big data, etc.," Tencent said.
This includes TenPay and WeChat Payment, which is linked to the hugely popular mobile messaging app WeChat, known as Weixin in China. WeChat, China's most popular app, had 438 million monthly active users by the end of June and has quickly become a digital Swiss Army knife, capable of everything from messaging to buying meals and booking taxis.
Tencent will also be able to expand its online video library, drawing from Wanda's licensed content including films and television programs.
Baidu declined to provide immediate comment.
Join the Conversation