Bottom line: Alibaba is likely to enter talks to buy a strategic stake in Groupon or even make a bid for the entire company, following its disclosure that it has purchased 5.6 percent of the US company in the open market.
Alibaba buys Groupon stake
What exactly was leading Chinese e-commerce company Alibaba (NYSE: BABA) thinking when it quietly purchased 5.6 percent of Groupon (Nasdaq: GRPN) shares on the open market without informing the faded US group buying pioneer? That’s the question that will be making the rounds this week, following the surprise disclosure of Alibaba’s purchase that Groupon only learned about through a regulatory filing.
Of course the most intriguing possibility is that Alibaba could be weighing a bid to acquire Groupon completely, which wouldn’t be that preposterous for reasons I’ll explain shortly. Other media are putting a less aggressive spin on the move, saying that Alibaba simply hopes to learn from Groupon’s group buying skills that first propelled it to fame about 6 years ago. Read Full Post…
Bottom line: Tencent would be wise to roll back a newly announced money-transferring fee on WeChat following state-media criticism, which could indicate a tougher stance by Beijing due to the platform’s increasingly dominant position.
Xinhua calls WeChat a catfish
It’s been quite a while since the last tussle between China’s influential central media and its vibrant private sector, so I was amused to read of a new flare-up in that regard after Tencent(HKEx: 700) said it would start charging fees for a money-transferring service on its popular WeChat platform. This looming flare-up has seen the state-run Xinhua news agency, often considered the voice of Beijing, criticize WeChat’s move as “excessive goose plucking”, which is quite a vivid description and certainly not too complimentary.
This particular assault is somewhat noteworthy, as it hearkens back to another similarly high-profile spat involving Tencent and WeChat 3 years ago. That tussle came as WeChat was beginning its meteoric rise, and saw leading telco China Mobile (HKEx: 941; NYSE: CHL) accuse the service of stealing its traditional SMS text messaging service. Tencent insisted at that time that WeChat would always remain free, defying China Mobile pressure to charge for the service and then divide the fees between the 2 sides. (previous post) Read Full Post…
Bottom line: Apple Pay’s upcoming China launch and WeChat’s roll-out of fees for its cash-providing service reflect growing competition in the e-payments market, which will result in a long and costly battle among major players for market share.
Apple, WeChat in new e-payments moves
The rapidly heating China market for electronic payments is in a couple of top headlines today, led by highly anticipated news that Apple (Nasdaq: AAPL) will launch its Apple Pay service in China later this week. At the same time, separate media reports say that Internet giant Tencent (HKEx: 700) is taking a major step towards monetizing the e-payments service attached to its wildly popular WeChat instant messaging service.
The pair of headlines underscore just how much potential both domestic and foreign companies see in the China electronic payments market, which is growing rapidly as consumers and companies do more of their buying online. Some new data nicely summarizes the market, with leading e-payments firm UnionPay reporting that transactions processed over its network soared 30 percent to 312 billion yuan ($48 billion) over the week-long Lunar New Year holiday last week. Read Full Post…
Bottom line: A new equity alliance between Qihoo and Norway’s Opera web browser is a smart move that could see initial turbulence due to differing management styles, but should ultimately benefit both sides.
Qihoo in group buying Opera
Security software specialist Qihoo 360 (NYSE: QIHU) is taking an important step towards its ambitions of becoming a global Internet brand, with word that it’s part of a group set to buy Norway-based Opera (Oslo: OPERA), maker of the world’s fourth most popular mobile Internet browser. Qihoo is already the maker of one of China’s most popular homegrown web browsers, and is also posing one of the first serious challenges in years to online search leader Baidu(Nasdaq: BIDU) with its Haosou.com engine. It’s also making a big push to move its highly popular security software products into the global marketplace.
Against that backdrop, this new deal looks quite intriguing and also like a smart step for Qihoo to complement its current strengths. But I would also caution that Qihoo is famous for its business tactics, which many might describe as highly aggressive and even unethical. Those include designing products that make big changes to computer and smartphone configurations without their users’ knowledge, most often to favor Qihoo at the expense of rival products. Read Full Post…
Bottom line: Results from Chinese New Year promotions show that WeChat will continue to dominate over Alipay in gift-giving and other friend-to-friend transactions over the mobile Internet due to its original design as a SNS service.
WeChat trounces Alipay in online hongbao promotions
Most of China has been on holiday these last few days, but leading Internet companies Tencent (HKEx: 700) and Alibaba (NYSE: BABA) have been working overtime trying to put the best possible face on dizzying numbers from their red envelope gift-giving promotions over the holiday.
Tencent is focusing on the headline figure of 8 billion money-filled virtual red envelopes, known in Chinese as hongbao, that changed hands on its wildly popular WeChat messaging service through the second day of the Lunar New Year. Alibaba, meanwhile, is focusing on its own headline figure that shows its Alipay electronic payments service received a whopping 21 billion hits per minute at the height of a New Year’s promotion it held with leading TV broadcaster CCTV. Read Full Post…
Bottom line: eLong and Ming Yang will complete their privatizations and de-list by the middle of the year, but more than half of the buyout offers for Chinese companies still waiting to exit New York will ultimately collapse.
eLong signs final buyout offer
Two longtime New York-listed Chinese companies are charging for the exit door on this last trading day in the Year of the Ram, with online travel site eLong (Nasdaq: LONG) and wind power equipment maker Ming Yang (NYSE: MY) both saying they’ve just signed final buyout agreements that will result in their privatization. Neither of these deals was ever in much doubt, since eLong’s was backed by Internet titan Tencent (HKEx: 700) and Ming Yang’s was relatively small, valued at less than $400 million, and was crafted by the company’s chief and dominant shareholder.
This pair are likely to ultimately complete their privatizations over the next 2-3 months and de-list by mid-year, following previous successful de-listings of names like online game operators Perfect World and China Mobile Games. But the big majority of previously announced buyout plans by around 40 US-listed Chinese companies are still pending, and I still believe that half or more of those could ultimately collapse due to failure to secure necessary funding. Read Full Post…
The wildly popular “Voice of China” variety show has landed at the center of a major copyright dispute in China, attracting big audiences in its own right. How the conflict gets resolved will pose a major test for China’s young and fiercely competitive industry that makes programs for TV and other video channels.
The conflict’s origins lie in “Voice of China’s” copyright owner, the Dutch company Talpa, and Vico Systems, which has been producing the program for the last 4 seasons. After failing to come to financial terms for a fifth season of the show, Talpa found a new production partner, Talent TV and Film (Shenzhen: 300426). (Chinese article) Read Full Post…
Bottom line: An internal review that netted a Youku Tudou executive for suspected abuse of position was likely linked to the company’s pending purchase by Alibaba, and could be followed by more similar internal actions by China’s big tech companies this year.
Internal probe nets Youku VP
E-commerce leader Alibaba (NYSE: BABA) is quickly learning that major M&A can be a tricky business, as 2 of its largest purchases deliver headaches with the exposure of problems at acquired companies. First there were a series of accounting irregularities and a criminal investigation against an official at its Alibaba Pictures (HKEx: 1060) unit purchased in 2014, and now newly acquired online video unit Youku Tudou (NYSE: YOKU) is providing yet more headaches.
The latest problems are related to a single executive, with reports that a company vice president named Lu Fanxi has been taken away for questioning by police on suspicion of using his position for personal gain. This kind of activity is quite common in smaller Chinese companies, and Alibaba itself uncovered similarly inappropriate behavior by salespeople and fraudulent merchants at its B2B marketplace unit in 2011. Read Full Post…
Bottom line: Pactera is likely to get sold and re-listed in China later this year, while New Oriental is likely to make a domestic listing worth up to $100 million for its Xun Cheng online education in a similar time frame.
Blackstone shops around Pactera
The homeward migration of overseas-listed Chinese firms is moving ahead, with word that privatized IT outsourcing firm Pactera and the online unit of education giant New Oriental (NYSE: EDU) are both potentially eyeing domestic IPOs in the upcoming Year of the Monkey. These stories represent 2 different threads from the larger story of overseas-listed Chinese companies returning home to make new IPOs.
The thread represented by Pactera has seen around 40 US-listed Chinese companies receive privatization offers over the last year from buyout groups hoping to re-list the firms in China at higher valuations. The New Oriental bid represents a second, more recent trend that has seen US-listed category leaders indicate they will keep their primary listings in New York, but then spin off some of their smaller units for separate domestic listings in China. Read Full Post…
The following press releases and media reports about Chinese companies were carried on February 2. To view a full article or story, click on the link next to the headline.
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Youku Tudou (NYSE: YOKU) VP Questioned by Police for Illegal Activity (Chinese article)
New Oriental Proposes China IPO for Xun Cheng, After Tencent Investment (PRNewswire)
Blackstone Shops China Software Firm Pactera to Potential Buyers (English article)
Sinovac (Nasdaq: SVA) Announces Receipt of Proposal to Buy the Company (PRNewswire)
OPPO, Vivo Snap at Apple’s (Nasdaq: AAPL) Heels in China Mobile Market (English article)
Bottom line: M&A and IPOs by Chinese gaming companies will remain low for the next 2-3 years due to lack of investor interest, but could pick up after that if some players start losing money and have to close or sell themselves to rivals.
Investors shun gaming companies
A new report on global gaming deals in 2015 is shining a spotlight on 2 major trends in China, namely the sector’s high degree of fragmentation and also the near-freeze in IPOs by Chinese companies last year. In fact, 3 Chinese gaming companies actually privatized from New York stock exchanges last year, accounting for more than half of the sector’s global deals last year in terms of total value.
Among the big Chinese deals, the largest saw stalwart Shanda Games finally privatize in a buyout valued at nearly $2 billion, ending a 2-year process. Another big gaming firm to privatize last year was veteran Perfect World, whose buyout was valued at $1 billion. The third was China Mobile Games, whose buyout was worth about $700 million. Read Full Post…
