Tencent Holdings Ltd. (700), Asia’s largest Internet company by market value, rose to a record after announcing an investment in a Chinese logistics center operator to boost its e-commerce business.
China South City Holdings Ltd. (1668), which is selling a 9.9 percent stake for HK$1.5 billion ($193 million), jumped as much as 83 percent in Hong Kong trading.
Tencent may use China South City’s logistics and trade center network to compete against Alibaba Group Holding Ltd. for China’s 608 million Internet users who spend money online. Shenzhen-based Tencent said it’s also working with China South City to help small- to medium-sized companies move their operations online.
“We view this as a savvy move,” Stephen Yang, a Hong Kong-based analyst at Sun Hung Kai Financial Ltd., wrote in a report today. “The investment will guarantee Tencent a stable logistics services partner and the option to develop more warehousing facilities.”
Tencent will pay HK$2.20 each for 680.3 million new shares in Shenzhen-based China South City, a price that is 1.4 percent higher than the Jan. 13 closing price. Tencent has an option to buy 244.8 million more new shares at HK$3.50 each, according to China South City’s filing to Hong Kong’s stock exchange yesterday.
The two companies will also work on integrating online and offline retail businesses, according to the statement. Tencent, whose biggest shareholder is Naspers Ltd. (NPN), rose as much as 5.4 percent to HK$536 before closing 0.8 percent higher at HK$512.50 in Hong Kong.
The company has risen 92 percent in the past 12 months, compared with a 1.6 percent decline for the benchmark Hang Seng Index.
China South City closed 61 percent higher at HK$3.49.
“The e-commerce business needs logistics backup,” Kevin Tam, an analyst at Core Pacific-Yamaichi International in Hong Kong, said by phone. “Tencent didn’t have a strong logistics base itself.”
Tencent and Alibaba are making acquisitions and investing to strengthen their mobile and e-commerce businesses.
Online retailing in China more than doubled each year from 2003 to 2011 and is projected to more than triple to $395 billion in 2015 from 2011, according to a McKinsey & Co. report in March.
“Tencent is trying to play catch up with Alibaba,” said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong.
Tencent recently invested in China cab booking app Didi Taxi and began allowing users to pay fares using its payment system Weixin Payment, Jerry Huang, a director of investor relations at Tencent in Shenzhen, said in an e-mail on Jan. 8.
Tencent also completed its acquisition of a stake in Activision Blizzard Inc. (ATVI) in October and invested in Korean messaging-app company Kakao Corp. in April 2012, according to its annual report.
Alibaba in May announced a $294 million purchase of a 28 percent stake in Beijing-based mapping company AutoNavi Holdings Ltd. (AMAP)
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