Meituan, Dianping Said Seeking to Raise Up to $3 Billion

  • Group-buying sites backed by Alibaba, Tencent announced merger
  • Tencent said to continue to invest in new funding round

China’s largest group-buying platforms, backed by Internet titans Alibaba Group Holding Ltd. and Tencent Holdings Ltd., are seeking to raise between $2 billion and $3 billion in new funds, according to people familiar with the matter.

Meituan.com and Dianping.com, which announced their merger earlier this month, will use the money to fund expansion, the people said, asking to not be identified because the matter is private. Tencent plans to invest in this round, the people said.

The fundraising comes as the new entity tries to secure its dominant status in China for online-to-offline, or O2O, services in competition with Baidu Inc.’s Nuomi. The nation’s three Internet giants are vying for pre-eminence and spending on subsidies and promotions to win users in a location-based services market expected to reach 7.2 trillion yuan ($1.13 trillion) in size by 2017, according to Shanghai-based IResearch.

“A lot of the money raised could be used for subsidies, which plays a huge role in retaining users,” said Tiffany Feng, an analyst at BOC International Holdings Ltd. in Hong Kong. “It needs more money to compete with Baidu which is also upping its game.”

Liu Yanfeng, a spokesman at Meituan; Wang Rui, a spokeswoman at Dianping; and Canny Lo, a spokeswoman for Tencent, all declined to comment.

Asia Investments

The fundraising comes as the size of the venture-capital business in Asia approaches that of North America, according to a new report. Investments in China and India more than tripled to $16.9 billion in the third quarter, compared with $17.5 billion in North America as of Oct. 1, according to Preqin Ltd., a London-based consultancy.

Meituan.com is a group-buying site similar to Groupon Inc., where people can get discounts on goods and services such as movie tickets and food delivery. It held about 52 percent market share in the first half of the year, according to researcher Analysys International.

Dianping.com, which also runs a consumer review site like Yelp Inc., accounted for about 30 percent and Nuomi about 14 percent, according to Analysys. Baidu, owner of China’s most-popular Web search engine, is investing 20 billion yuan in Nuomi during a three-year period.

Alibaba’s shares rose about 1 percent to $72.65 at the close in New York, while Tencent’s were little changed at $19. Baidu gained 2.4 percent to $154.68.

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