Oct 09, 2015 04:05 PM

Wary of Cash-Rich Rivals, Major Group-Buying Sites Merge

(Beijing) – Two major group-buying websites have announced they will merge, a move one investor says is a preemptive effort to ward off cash-rich competitors. and published a statement on October 8 announcing a merger they said is supported by investors.

Meituan CEO Wang Xing and Dianping CEO Zhang Tao will run the new firm, the statement said. The companies will keep their own brands, websites and teams after the merger.

China Renaissance Partners, an investment firm, consulted on the merger, the statement said.

China Renaissance Partners and Sequoia Capital, another investment firm, pushed for the merger, said an investor with knowledge of the matter. The investment firms also drove the tie-up of the classified advertising sites and, he said.

Meituan, which arranges group purchases such as for food and movie tickets, and Dianping – which got its start in restaurant reviews but has expanded into restaurant group offers and wedding services – expect to see greater competition from rivals, the investor said.

He compared the merger to that of the taxi-hailing apps Didi and Kuaidi, in that they wanted to be stronger in the face of competition from other companies, such as Uber Inc. and CAR Inc.

Cheng Rentian, a senior manager of the investment firm Fortune Venture Capital Co. Ltd., said the group-buying website, which is backed by Baidu Inc.; the restaurant-review site, invested by Alibaba Group Holding Ltd.; and the eatery-booking site are competitors to Meituan and Dianping.

The new Meituan-Dianping company controls around four-fifths of the group-buying and wedding services market, the Internet data provider EnfoDesk said.

But, Cheng said Nuomi and Koubei will claim a greater market share in the future because of the financial support and other resources they get from the Internet giants behind them.

Baidu has said it will invest 20 billion yuan to help Nuomi develop its business, he said, and Alibaba will put 5 billion yuan into Koubei.

Meituan and Dianping have had a hard time raising money because this year's stock turmoil has dampened the appetite of investors, a change that spurred the firms to merge, Cheng said.

(Rewritten by Guo Kai)

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