China’s Qunar to go private in deal valuing firm at US$4.4bn

Company is second US-listed Chinese digital travel services provider to be taken private after eLong in June

PUBLISHED : Wednesday, 19 October, 2016, 3:02pm
UPDATED : Wednesday, 19 October, 2016, 10:39pm

Digital travel services giant Qunar is set to go private in a merger with Ocean Management Holdings, a deal that the Nasdaq-listed Chinese company said puts its value at US$4.4 billion.

The transaction marked the second major Chinese online travel company trading on the Nasdaq stock market to be targeted for privatisation this year, following eLong’s merger with China E-Dragon Holdings in June.

Beijing-based Qunar said on Wednesday that its undisclosed merger consideration represents a premium of about 15 per cent to the closing price of the company’s American depositary shares on June 22, the last trading day prior to its receipt of a “going-private” proposal.

On that date, Qunar’s share price reached US$26.42. The company’s shares advanced 0.70 per cent to close at US$28.95 in trading on Tuesday in the United States.

Ocean Management is an investment vehicle controlled by Alex Zheng Nanyu, the co-founder of Chinese budget hotel chain operator 7 Days Group Holdings.

Qunar’s merger with Ocean Management is expected to close in the first half of next year, subject to customary closing conditions including shareholders’ approval.

Under the terms of their deal, each ordinary share of Qunar issued and outstanding will be cancelled in exchange for the right to receive US$10.13 in cash without interest.

Each American depositary share, which represents three ordinary shares, will be cancelled in exchange for the right to receive US$30.39 in cash without interest, except for those owned by International, M Strat Holdings, Momentum Strategic Holdings and certain other minority shareholders.

At the completion of the merger, Ocean Management, and the other existing minority shareholders will form the ownership group behind Qunar.

That deal would follow the blockbuster share swap between former digital travel services rivals Ctrip and Qunar in October last year, when Chinese online search titan Baidu exchanged its shares in Qunar for a 25 per cent stake in Nasdaq-listed Ctrip.

Shanghai-based Ctrip, the country’s biggest digital travel services provider, obtained a 45 per cent interest in Qunar from that deal with Baidu.

Digital travel includes everything from booking online flights and hotels to packaging tours.

Qunar last month reported that its second-quarter net loss narrowed to 698.8 million yuan compared with 815.7 million yuan in the same period last year.

The high interest in mainland China’s digital travel services industry has been fuelled by growing travel demand by the country’s consumers.

Analysts at New York-based research firm eMarketer have estimated that digital travel sales on the mainland are forecast to reach US$121.98 billion next year, up from an estimated US$95.29 billion this year.

That would help ratchet up overall Asia-Pacific digital travel sales next year to US$215.92 billion, from US$177.66 billion projected this year. By comparison, North America digital travel sales are expected to top out next year at US$200.43 billion.