TENCENT, JD.COM TEAM UP TO TAKE ON ALIBABA
Firms paying US$863m for a combined 12.5pc stake in apparel platform Vipshop
TENCENT Holdings Ltd and JD.com Inc will buy a slice of one of China’s largest online retailers for US$863 million (RM3.5 billion), forging an alliance to take on Alibaba in e-commerce and digital payments.
The pair agreed to buy shares in United States-listed Vipshop Holdings Ltd at a premium of 55 per cent to their previous close.
The deal comes with a business cooperation pact that includes setting aside real estate for Vipshop on JD.com’s site and Tencent’s digital wallet, a thriving and integral part of the WeChat messaging service used by close to a billion people.
Once known mainly as a video games distributor, Tencent has grown WeChat into China’s premier social media platform.
Now it plans to use that ubiquity and JD.com — in which it holds a significant stake — to fend off e-commerce leader Alibaba Group Holding Ltd.
Yesterday’s agreement came days after Tencent unveiled a US$635 million deal to buy five per cent of hypermart chain Yonghui Superstores Co — a rare incursion into a physical retail arena that Alibaba covets.
“Tencent and JD.com need this assistance, given Alibaba’s spectacular execution this year,” said Blue Lotus Capital Advisors Ltd founder Eric Wen.
“Tencent needs to go from the backstage to the frontstage and that’s what they’ve done. Tencent has acquired a stake in Yonghui and now Vipshop, this is something JD.com cannot pull off by itself.”
Tencent’s and JD.com’s backing is a boon for Vipshop, which had carved out a profitable niche in women’s fashion but has now chalked up two successive quarters of net income declines.
Despite strong growth across categories like electronics, JD.com itself is grappling with renewed competition from Alibaba, which in the last quarter grew revenue 61 per cent and is making headway into overseas markets.
Once completed, Tencent and JD.com would own about 7.0 and 5.5 per cent of Vipshop’s issued stock, respectively, said the two companies in a statement yesterday.
Rather than buy up entire companies, Tencent has traditionally preferred to strike deals with key players in segments it cannot dominate, such as e-commerce and search. Bloomberg