FTuan-Gaopeng Merger Looms, LaShou Next? F团与高朋网合并接近完成拉手网或成下一个目标

By newsdoug on June 20, 2012

FTuan prepares to merge with Gaopeng A day after leading group buying site LaShou formally scrapped its New York IPO (previous post), there’s an interesting detailed report out about the ongoing merger between 2 group buying sites backed by Tencent (HKEx: 700), China top Internet company. But what’s more interesting to me than the actual report of this ongoing merger is the potential for the cash-rich Tencent itself to emerge as a key consolidator in the ongoing clean-up of the unruly group buying space, perhaps even making a play for LaShou itself as that company struggles for survival.

Let’s have a look at the actual news, which has media reporting that the 2 Tencent-invested units, FTuan and Gaopeng, are close to completing a merger that would see Tencent hold a 50 percent stake in the new company. (Chinese article)

FTuan appears to be the dominant player in the marriage, and would presumably take over many of the top executive spots at the new company following mass layoffs and the departure of many top executives at Gaopeng last year. US group buying leader Groupon (Nasdaq: GRPN), which is Tencent’s joint venture partner in Gaopeng, would receive a minority stake in the merged company, as would other previous investors in Gaopeng and FTuan.

News of this merger isn’t new, with reports of such a marriage first emerging in April, alongside other reports that one of the sector’s other major players, 55tuan, was in separate talks to merge with the group buying business of e-commerce company Ganji. (previous post) What’s most intriguing to me in this latest news is the fact that Tencent, through the merger, will be the controlling stakeholder in what’s likely to become not only one of the industry’s top new players, but also one of its best funded ones due to Tencent’s strong cash position.

That means that if Tencent wants to become the group buying sector’s dominant player, it could soon embark on an acquisition drive using the newly created FTuan-Gaopeng as a platform for industry consolidation.

LaShou could be an attractive target for such a consolidation, as the company has a well established brand and national network, and is clearly in desperate need of cash. I predicted earlier this week that LaShou might even be forced to close before the end of summer due to its rapidly deteriorating situation. But if Tencent decides that LaShou looks attractive, perhaps we could see an interesting mega-merger between FTuan-Gaopeng and LaShou instead, which would create a truly interesting Chinese group buying leader.

Bottom line: The new merger between FTuan and Gaopeng could set the stage for creation of a new group buying leader backed by cash-rich Internet giant Tencent.

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