China’s 58.com Inc (58同城網) said it has agreed to acquire a 43 percent stake in competitor Ganji.com’s (趕集網) parent company Tencent Holdings Ltd (騰訊) in a cash and stock deal aimed at increasing their combined share of China’s online classified listings.
The firm is to pay US$412.2 million in cash and about 34 million newly issued ordinary shares, equivalent to 17 million American depositary receipts (ADR), the Beijing-based company said in a statement yesterday.
The stock portion of the deal is to have a value of US$1.15 billion based on Thursday’s closing price.
Simultaneously, Tencent agreed to buy an additional US$400 million of newly issued ordinary shares from 58.com at a price equivalent of US$52 per ADR to increase its stake in the New York-listed company to about 25 percent. The ADRs have climbed 63 percent this year to US$67.57 in New York as of Thursday.
The two Web sites are China’s biggest classified ad sites, and a combination is expected to help them increase market share and reduce costs, Oberweis Asset Management Inc senior analyst Jeff Papp said.
The company’s marketing and sales expenses more than doubled in the fourth quarter of last year to US$60.4 million, while revenue increased 77 percent to US$80.2 million, according to the company’s earnings report released on March 8.
By combining operations, those costs are to be reduced, Rosenblatt Securities Inc head of China research Jun Zhang said. Ganji.com is closely held.
Similar to San Francisco-based Craigslist Inc, 58.com was the largest Chinese initial public offering in New York in 2013. It has expanded its offerings and built its user base through mergers and acquisitions. It increased its real-estate listings last month after purchasing Web site Anjuke.
The company’s partnerships with Beijing Momo Technology Co Ltd (陌陌), Xiaomi Corp (小米) and Tencent have contributed to user traffic, 58.com chief executive officer Yao Jinbo (姚勁波) said in an earnings call on March 9.
Tencent, China’s second-biggest Internet company, held a 24 percent stake in 58.com, according to a filing last month.
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