Tencent-Holdings

Update On TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) App Merger

The merger of Kuaidi Dache app backed by Alibaba Group Holding Ltd (NYSE:BABA) and Didi Dache app, in which TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) is an investor, won’t be subject to a regulatory assessment. The announcement of the deal was done on February 14, 2015. The merger agreement is expected to complete in coming weeks. The two companies have not disclosed what stakes Tencent and Alibaba would have after the merger.

The merger

For Tencent and Alibaba, the peers in the China internet industry, the merger would result in adding more services that users of the mobile payment systems can rely on. Joe Lee, the co-founder of Kuaidi Dache said that both Tencent and Alibaba’s payment apps would continue to be used. The deal will prompt the two companies to own 99% share of the tax-hailing application market in China. The two companies hold just 15% of the market of taxi rides, including the cabs services taken by people on the road without the use of mobile app.

The deal implications

TENCENT HOLDINGS ADR (OTCMKTS:TCEHY) and Alibaba earlier announced that they both will maintain separate operations and brands while appointing ‘Co-chief Executives’ from both companies. The merger news has raised monopoly issues, with a rival peer in the industry filing a complaint with Antimonopoly Bureau in China. Shen Danyang, a spokesperson for Ministry of Commerce, said that the China Ministry has yet not received a declaration from the companies on planned apps merger.

The other details

The companies said that they weren’t required to submit a declaration to the Ministry as their total annual revenue didn’t touch $320 million. It is the threshold set in China’s antimonopoly law above which the government approval is required. After the merger, Tencent and Alibaba will continue to offer subsidies and cash rewards to drivers and passengers to get more customers to their platforms. The deal will enable the companies to reallocate resources in building up their mobile platforms.

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