Mobike, Ofo investors are said to be in talks to merge China startups

HONG KONG: Mobike and Ofo investors are in early talks to push China’s two largest bike-sharing startups into a merger, aimed at ending a costly competitive battle and creating a single dominant player in the fast-growing business, according to sources.

Investors in both companies have been holding talks to sort through issues such as how to split equity as a precursor to getting the companies to the table for negotiations, said the people, asking not to be identified because the matter is private. The pair’s combined valuation would likely exceed US$4bil. The discussions are in a preliminary stage, and may not be consummated, they said.

The companies are separately backed by China’s two biggest internet giants – Alibaba Group Holding Ltd and Tencent Holdings Ltd – which have a track record of investing in competing startups and then combining them as a leader emerges to save money. Unlike in ride-hailing for cars however, China’s bike-sharing startups are the global pioneers and are plotting expansions abroad. A truce at home would give them more resources to gain ground in the US, Europe and other parts of Asia.

Shi Shaochen, a spokesman for Ofo, registered as Beijing Bikelock Technology Co, declined to comment. Mobike, formally Beijing Mobike Technology Co, said in a statement that it is not contemplating a merger.

“Mobike is the clear leader in the global bikesharing industry, supporting 30 million rides in 180 cities around the world every single day,” the company said. “We are fully focused on extending our global success.”

With Tencent backing Mobike and Alibaba siding with Ofo, the startups have flooded major cities such as Beijing and Shanghai with their trademark orange and yellow bicycles just a few years after their founding. They’ve raised more than US$1bil in venture money combined and, with smaller rivals, have waged one of the strangest and most colorful battles in the technology world.

Alibaba and Tencent have used the duo as proxies for a battle in mobile payments, cloud computing and winning user data.

In June, Tencent, Sequoia Capital, TPG and Hillhouse backed a US$600mil funding round for Mobike and its fleet of orange bicycles. The next month, Ofo, with its canary yellow two-wheelers, raised more than US$700mil from investors including Alibaba, Hony Capital and Citic Private Equity.

Mobike is valued at US$3bil, while Ofo is US$1bil, according to researcher CB Insights. Ofo was seeking funding in June at a US$3bil valuation.

The companies have forced some smaller operators out of business. Ofo has said it plans to have 20 million bikes in 20 countries by the end of the year.

Ofo was founded in 2014 on the grounds of Beijing’s prestigious Peking University as a student project.