Didi set to fall under state control

Beijing’s municipal government has proposed an investment in Didi Global that would give state-run firms control of the world’s largest ride-hailing company, according to people familiar with the matter. Under the preliminary proposal, Shouqi Group — part of the influential Beijing Tourism Group — and other firms based in the capital would acquire a stake in Didi, the people said, asking not to be identified discussing private information. Scenarios under consideration include the consortium taking a so-called “golden share” with veto power and a board seat, they added.

Didi’s shares spiked 8 per cent before paring gains to about 5 per cent higher in pre-market trading in New York. It’s unclear how large a stake the city is eyeing and whether its proposal will be approved by senior government officials. Didi is currently controlled by the management team of co-founder Cheng Wei and President Jean Liu, which received aggregate voting power of 58 per cent after the company’s US initial public offering. Softbank Group and Uber Technologies are Didi’s biggest minority shareholders.

Representatives for Didi didn’t respond to a written request for comment. The Beijing municipal party committee press office didn’t respond to a faxed request for comment, while repeated calls to a phone number provided by Shouqi staff went unanswered. And the Beijing Tourism group didn’t reply to a request for comment faxed to a general office number provided by a receptionist.

Local governments have traditionally had a big say in the restructuring of companies on their turf, and the envisioned solution dovetails with Xi Jinping’s priorities of redistributing wealth and curbing the influence of the internet sector.

The city’s proposal could entail taking a sizeable slice of Didi or a nominal stake accompanied by a golden share and board seat, the people said. The latter model would be akin to an earlier investment by the government in Bytedance Ltd.’s Chinese unit, which gave the state entity veto-rights over important decisions.

The takeover proposal comes alongside a swath of penalties Xi’s administration is considering for the country’s ride-hailing leader, which debuted in New York in June over the objections of the Cyberspace Administration of China. The internet industry overseer saw that decision as a challenge to the central government’s authority and officials from the CAC and other ministries.