China’s Two Largest  Taxi Apps Merge

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Alibaba Group Chairman and Billionaire Jack Ma

Billionaire Jack Ma, chairman of Alibaba Group Holding Ltd.

Lam Yik Fei/Bloomberg

China’s two largest taxi-hailing applications, backed separately by Alibaba Group Holding Ltd. and Tencent Holdings Ltd., have announced a merger that will help them cope with rising competition.

Hangzhou Kuaidi Technology Co., known as Kuaidi Dache, completed an alliance with Didi Dache, according to a joint statement e-mailed on Saturday, which didn’t name the merged entity. A briefing will be held after the week-long Lunar New Year holiday that begins in China on Feb. 18.

The deal will create China’s biggest mobile platform for local transportation by users, the companies said, even as Chinese regulators cracked down on car-hailing apps including San Francisco-based Uber Technologies Inc. The Transportation Ministry last month banned private vehicles from acting as taxis while also endorsing services using licensed vehicles and drivers such as those provided by car-rental firms.

“The merger is the result of strong desires from investors of both companies to stop bleeding from our cut-throat money-burning competition in the market,” Dexter Chuanwei Lu, Kuaidi’s chief executive officer, said in an internal memo posted on news portal Sina.com. The combined entity will also begin considering listing plans, Lu said.

Rising Competition

The merger comes less than two months after Baidu Inc., the owner of China’s biggest search engine, agreed to buy a stake in Uber. With more than 500 million people in China using mobile phones to access the Web, the nation’s three largest Internet companies are stepping up the competition to offer services and win customers.

Kuaidi holds 54.4 percent of China’s car-booking market with more than 200 million users in 358 cities in the country, including Hong Kong, the company said, citing researcher Analysys International. Kuaidi has been competing with Didi in many Chinese cities in the past two years, providing subsidies to both taxi drivers and riders to attract more users.

Kuaidi, whose investors include Alibaba and Japan’s SoftBank Corp., last month raised $600 million from investors including SoftBank, Alibaba and Tiger Global Management, funding that was said to give it a valuation of more than $2 billion.

Tencent, an investor of Didi, would be the largest shareholder in the combined company, which may have a valuation of about $6 billion, people familiar with the matter said on Feb. 13.

Separate Brands

Lu and Wei Cheng, the chief executive of Didi, will become co-CEOs of the combined company, according to the joint statement. The new firm will conduct business under the separate brands, it said.

“We should thank Alibaba and Tencent for putting aside their different opinions and business interests to make this happen,” Didi’s Cheng said in a separate internal memo published on Sina.com.

Didi started the plan in Shenzhen on Jan. 21, trying to finish the merger negotiation with Kuaidi before Valentine’s Day, said Cheng.

“And we did it in just 22 days,” he said. “This is a Valentine’s Day’s gift to the Chinese people and our great journey is just getting started from here.”

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