UTour Gives Up Bid for Ctrip Subsidiary

(Beijing) — Outbound-travel agency UTour Group Co. Ltd. has decided against acquiring a Ctrip subsidiary, discouraged by an overly prolonged transaction and by delisting policy uncertainties, both of which have altered the outlook for the deal.

UTour has terminated a 2.6 billion yuan ($378 million) deal to purchase Hytours, chiefly owned by Nasdaq-traded Ctrip, according to UTour’s Thursday filing on the Shenzhen bourse.

Proposed in March 2016, the full acquisition of Hytours was seen as an alliance between two of the most influential outbound-travel providers in China and would have given Ctrip a 5% stake in UTour.

However, rosy prospects were cut short two months later as China’s stock regulators began scrutinizing possible market violations linked to the delisting of U.S.-listed Chinese companies.

Analysts said the slump in stock prices in China that occurred waiting for delisting policies to clear up put the original terms of the deal out of date, leaving UTour with no choice but to scrap the deal completely.

“Ctrip’s listing on the Nasdaq has added to the complications of the deal, and was one of the reasons the deal was killed,” says Wei Changren, CEO of travel consultancy Jinlu. “Whether and how Ctrip — the largest stakeholder of Hytours and an overseas traded company — would delist depended largely on expected polices.”

The transaction was retracted although it received the go-ahead from regulators because the “remaining uncertainties regarding delisting policies and the overly time-consuming process of the transaction would encumber all parties,” Beijing-based UTour said in the announcement.

Wei said the proposal had to be abandoned because of the new situation. “During the yearlong wait for policies to clear up, domestically traded UTour’s valuation has tumbled along with other A-share stocks, making the original transaction price appear too expensive,” he said.

Former Ctrip rivals Elong and Qunar both returned to the mainland from U.S. exchanges in the second quarter of 2016, around the time regulators began to closely monitor delistings. Both the moves came shortly after Ctrip began taking control, merging with Qunar in October 2015 and buying a 37.6% stake in Elong shortly before its privatization at the end of May.

“The termination of the deal will not affect larger company strategies; UTour and Hytour will proceed with other areas of cooperation,” Guo Lei, UTour’s director of strategic investments, told Caixin.

Contact April Ma (fangjingma@caixin.com)