Wanda Teams With Tencent, Baidu to Challenge Alibaba

Three billionaires from China’s property and Internet industries are forming an online shopping venture to challenge Alibaba Group Holding Ltd. as it heads toward what may be the biggest initial offering in the U.S.

Dalian Wanda Group, China’s biggest commercial land developer, is joining with Tencent Holdings Ltd. and Baidu Inc. to form the 5 billion yuan ($813 million) venture. Wanda will have a 70 percent stake while the other two companies will own 15 percent each, Wanda said in a statement.

The partnership reflects optimism there is room for competition in the world’s fastest growing e-commerce market, a space dominated by Alibaba and its founder, Jack Ma, who is now China’s richest person. Online retailing in China is projected to more than triple to $395 billion in 2015 from 2011, according to McKinsey & Co., as China has more Internet users than the population of any other country except India.

“It’s a very interesting battle to watch -- three top rich people join hands to challenge another bigger billionaire,” said Cao Lei, director of the China E-Commerce Research Center, a private research agency based in Hangzhou. “The new venture will not be an immediate challenge to Alibaba. Rome can’t be built in a day.”

Wanda’s Wang Jianlin, Baidu’s Robin Li and Tencent’s Ma Huateng all went to the briefing in the southern city of Shenzhen to announce the venture. Ma Huateng is China’s second-richest man, while Li is third and Wang fourth. Jack Ma tops the list with $21.8 billion, according to the Bloomberg Billionaires Index.

Bricks, Mortar

Wang said the 5 billion yuan is only the first investment, and three firms are expected to put in nearly 10 times that in the coming five years, according to the transcript of his speech on Sina.com today.

The new group melds Baidu’s search capabilities and Tencent’s popular WeChat social messaging network with Wanda’s brick-and-mortar infrastructure. In addition to 40 hotels, Wanda runs at least 49 commercial properties across China and 40 department stores.

“One day you are walking on a Wanda square and spot a girl with a nice dress, you just take a picture of her, and then you will know immediately which store in the Wanda plaza is selling the dress,” Baidu’s Li said.

Wanda company said last year it’s investing 50 billion yuan to build a movie studio and theme-park complex in the eastern city of Qingdao.

Connect Users

Their partnership comes after Alibaba said its net income almost tripled in the first quarter to $1.99 billion, giving potential investors their last look at company numbers before deciding whether to buy shares in the IPO.

Alibaba said in March it would invest about $692 million in Intime Retail Group Co., owner of department stores and supermarkets, in its own effort to integrate online and offline shopping.

“Online-to-offline is the biggest cake in e-commerce,” Wanda’s Wang said today. “There’s no true online-to-offline platform in China and, in this situation, everyone’s chances are equal.”

Tencent, Alibaba and Baidu are making acquisitions and investing in companies to strengthen their e-commerce businesses. Wanda has gone on its own buying spree: it won a bid for a piece of land in Beverly Hills, California, this month, and is venturing into property projects in London and Madrid after buying U.S. cinema chain AMC Entertainment Holdings Inc. for $2.6 billion in 2012.

In a statement, Tencent said the three companies would make an initial investment of 1 billion yuan in the venture. Dong Ce, the co-founder of Jiapin.com, an online shopping website, will be the chief executive.

Ma Huateng of Tencent said the venture is trying to make offline businesses smart by using mobile Internet technology.

“It’s a very meaningful trial,” Ma said, according to the transcript of his speech. “It can make people’s life easier, smarter, more efficient, more creative and cooler.”

— With assistance by Xin Zhou

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