Bike-sharing services

Chinese bike sharing firm Ofo proposes merger with smaller rival Hellobike

  • A deal would make the merged entity the dominant player in the highly competitive Chinese bike sharing market
  • Local governments in Beijing, Shanghai, Shenzhen and Guangzhou have banned companies from introducing new bikes to reduce disruption
PUBLISHED : Friday, 19 October, 2018, 3:31pm
UPDATED : Friday, 19 October, 2018, 8:40pm

Shanghai-based bike sharing company Hellobike said on Friday its bigger rival Ofo has proposed a merger between the two companies.

A deal would make the merged entity the dominant player in the market but would also be complementary because Ofo focuses on first tier Chinese cities while Hellobike is stronger in second and third-tier cities.

Chinese media reported on Friday that Hellobike would be the one acquiring Ofo.

“However, we think the most important thing for Hellobike now is to improve ourselves and serve our customers better,” the Hellobike spokeswoman said.

Hellobike did not elaborate on when it received the merger proposal or if talks are ongoing between the two companies.

An Ofo spokesman did not immediately comment.

Ofo and Meituan Dianping-owned Mobike are the top two players in the country’s bike sharing market, with figures from May, the latest available, showing 11.3 million and 9.3 million monthly active users (MAU) respectively, according to market researcher Trustdata.

Questions have been raised about future growth prospects in the industry after local governments in China’s four biggest cities – Beijing, Shanghai, Shenzhen and Guangzhou –banned companies from introducing new bikes to reduce the disruption caused by illegally parked two wheelers. For Hellobike, the move has made it all but impossible to expand into first-tier cities by itself.

It's not easy being No. 3 in China’s ruthless bike sharing market

China’s car ride hailing giant Didi Chuxing, the biggest shareholder in Ofo, was also in talks with the bike sharing company about a possible acquisition, people familiar with the talks told the South China Morning Post earlier. However, after a leaked term sheet for Didi’s proposed acquisition of Ofo was published by Chinese media, a Didi spokeswoman said the company did not have “any intention to buy Ofo”, adding that Didi will support Ofo’s “independent development”.

An Ofo spokesman at the time also denied the existence of such a document and vowed it would remain independent.

Last month it was sued by Shanghai Phoenix Bicycles for US$10 million in unpaid bills, according to a Phoenix filing to the Shanghai Stock Exchange.

Ofo and Hellobike are both backed by Alibaba Group’s financial arm Ant Financial, which owns 36 per cent of Hellobike, while Ofo has also received backing from Alibaba itself. In March, Ofo announced it secured US$866 million in a round of funding led by Alibaba.

Alibaba is the parent company of the Post.

A relative latecomer to the crowded market, Hellobike has survived a shake-out that saw rivals such as Xiaoming Bike and Kuqi Bike file for bankruptcy, becoming the No 3 player.

Separately, Hellobike announced Friday it has integrated ride hailing service Dida into its app, serving 81 cities including Beijing, Hangzhou and Xiamen.