Top internet travel companies Ctrip and Qunar make share swap
Baidu is backing collaboration of China's top internet travel companies
Ctrip.com International and Qunar, the two biggest online-travel companies in China, have completed a blockbuster share swap paving the way for a collaboration backed by internet-search giant Baidu.
The transaction announced late on Monday involved Baidu exchanging the shares that it owns in Qunar - 178.7 million Class A shares and 11.45 million Class B shares - for 11.49 million newly issued shares of Ctrip.
That exchange ratio represented a 36 per cent premium to Qunar's closing price last Friday, valuing the company at about US$7 billion. The deal provides Baidu with a 25 per cent interest in Ctrip, while Ctrip now controls 45 per cent of Qunar.
Robin Li Yanhong, chairman and chief executive of Baidu, said the tie-up "creates value for our shareholders and demonstrates Baidu's continuing commitment to online travel, an industry with tremendous potential ahead".
Baidu and Ctrip have also agreed on business cooperation across a broad base of products and services.
Beijing-based Baidu said that it expected to continue its existing business cooperation with Qunar.
All three companies in the deal are listed on Nasdaq.
"We believe [this partnership] will help build a healthy travel ecosystem in China," said James Liang, chairman and chief executive of Ctrip. "This milestone transaction will enable us to focus on providing the best travel products and services."
Their partnership announcement followed scuttled merger talks between Qunar and Ctrip several months ago.
Qunar said in June that it had rejected a buyout offer from Ctrip, which wanted to acquire all of its outstanding shares.
Qunar had earlier raised US$500 million from a funding round.
Merger negotiations between the two online travel-market rivals have been widely speculated on since last year.
Qunar chief executive Zhuang Chenchao said the travel industry's steady growth had already enabled his company to become "China's fourth-largest e-commerce company".
Data from iResearch predicted that China's online travel market would be worth US$75 billion by 2017, up from an estimated US$55 billion this year.
Barclays has forecast Ctrip to post third-quarter revenue of US$472.3 million and net profit of US$10.38 million, while new partner Qunar is estimated to record a revenue of US$184 million and a net loss of US$117 million in the same period.
Sohu bounces back
Chinese online media, gaming and search giant Sohu.com plans to ramp up strategic business investments as it reported a net profit of US$39.12 million in the quarter to September, compared with a US$27.14 million loss a year ago, on the back of its fast-growing Sogou search engine business. Total revenue last quarter was up 21 per cent to US$522.09 million from the previous year.
Sohu, however, said Nasdaq-traded subsidiary Changyou.com posted flat year-on-year online game revenue of US$153 million. Brand advertising income saw a modest 2 per cent year-on-year increase to US$152 million, while Sohu Video was up 9 per cent to US$57 million.
"The soft macroeconomy had a major impact on traditional brand advertisers who shrank their marketing budgets," Sohu chairman and chief executive Charles Zhang Chaoyang said yesterday.
Sogou still managed a record-high revenue last quarter as mobile search traffic surpassed desktop computer traffic for the first time.
Barclays analyst Alicia Yap said "the lacklustre performance of Changyou's gaming revenue and slowing Sohu Video revenue have resulted in a further drag on [Sohu's] overall profitability".