Oct 27, 2015 06:28 PM

Complex, US$ 2.5 Bln Deal Gives Baidu One-Quarter of Ctrip

(Beijing) – A recent deal has made search giant Baidu Inc. the largest shareholder in the online travel firm International Ltd., the firms said in statements on October 26.

Baidu bought newly issued Ctrip shares to take 25 percent of the firm, paying the travel company with shares in Information Technology Co. Ltd. The deal gives Ctrip 45 percent of Qunar, another travel-booking site.

The complicated transaction was worth about US$ 2.5 billion according to share prices on October 26.

Baidu CEO Li Yanhong and Ye Zhuodong, head of investments, will join Ctrip's board of directors. Four Ctrip executives will join Qunar's board, including CEO Liang Jianzhang and COO Sun Jie.

Zhuang Chenchao, the founder and CEO of Qunar, could be in an embarrassing position, a source close to Ctrip said, and he may choose to sell his shares. Zhuang owns 6.8 percent of Qunar.

Qunar and Ctrip said in their statements that they will focus on different services and products.

The merger comes about two months after Qunar filed a complaint with the Ministry of Commerce's Anti-Monopoly Bureau, asking regulators to carry out an investigation into Ctrip's acquisition in May of a 36.36 percent stake in the online travel agency Elong Inc.

Baidu spent heavily on Qunar amid a price war with Ctrip, including on discounts for flights and hotels, but Qunar still did not take a leading market share and has not turned a profit, said an investor familiar with the online travel industry.

Qunar's financial report shows it had revenue of 881 million yuan in the second quarter of this year, 120 percent more than in the same period of last year, but it still suffered a net loss of 815.7 million yuan, up 92 percent.

Baidu chose to end the price war because it needed money for its online video segment and a business that arranges online deals such as food orders, the investor said.

"The merger will help Baidu reduce its losses and improve the profitability of the online travel industry, a result investors want," the investor said. "It is similar to the tie-up of group-buying websites and"

Mergers of rival Internet firms have become common recently as they seek to prevent fierce competition and keep businesses running while investors become scarce.

The firms running the car-hailing apps Didi and Kuaidi announced a merger in February.

China's tourism industry had revenue of 3.38 trillion yuan last year, accounting for 5.5 percent of gross domestic product, and 279.8 billion yuan of that came from the online travel market, data from the Internet data provider EnfoDesk shows.

(Rewritten by Guo Kai)

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