Exclusive-Tencent plans to divest $24 billion Meituan stake -sources

By Julie Zhu and Kane Wu

HONG KONG (Reuters) -China’s Tencent Holdings plans to promote all or a bulk of its $24 billion stake in meals supply agency Meituan to placate home regulators and monetise an eight-year-old funding, 4 sources with data of the matter stated.

Tencent, which owns 17% of Meituan, has been partaking with monetary advisers in current months to work out easy methods to execute a doubtlessly giant sale of its Meituan stake, stated three of the sources.

Expertise big Tencent, the proprietor of China’s No. 1 messaging app WeChat, first invested in Meituan’s rival Dianping in 2014, which then merged with Meituan a 12 months later to type the present firm.

Based mostly on Meituan’s market capitalisation as of Monday, Tencent’s 17% stake is price $24.3 billion.

Tencent is searching for to kick off the sale inside this 12 months if market situations are beneficial, stated two of the sources.

The deliberate sale comes towards the backdrop of a sweeping regulatory crackdown in China since late 2020 on know-how heavyweights that took purpose at their empire constructing through stake acquisitions and home focus of market energy.

The regulatory crackdown got here after years of a laissez-faire method that drove progress and dealmaking at breakneck pace.

Tencent has been decreasing holdings partly to appease the Chinese language regulators and partly to e book hefty income on these bets, stated three of the sources. The worth of its shareholdings in listed firms excluding its subsidiaries dropped to simply $89 billion as of end-March from $201 billion in the identical interval final 12 months, based on its quarterly studies.

“The regulators are apparently not completely satisfied that tech giants like Tencent have invested in and even turn out to be an enormous backer of assorted tech corporations that run companies intently associated to folks’s livelihoods within the nation,” stated one of many sources.

Shares of Hong Kong-listed Meituan fell greater than 10% following the Reuters report whereas Tencent dropped greater than 2% in Tuesday afternoon commerce.

Tencent declined to remark. Meituan didn’t reply to a request for remark.

All of the sources declined to be named attributable to confidentiality constraints.

Tencent introduced in December the divestment of round 86% of its stake in JD.com Inc, price $16.4 billion, weakening its ties to China’s second-biggest e-commerce agency.

One month later, it raised $3 billion by promoting a 2.6% stake in Singapore-based gaming and e-commerce firm SEA Ltd, which was seen as a transfer to monetise its funding whereas adjusting enterprise technique.

Tencent has not pinned the sale of JD.com and SEA stakes on the regulatory crackdown.

The potential sale of the Meituan holding will possible be executed through a block commerce within the public market which usually takes a day or two from advertising and marketing to completion, based on two of the sources.

It could be a quick and clean means for Tencent to dump the shares, they added, in comparison with negotiating with a personal purchaser.

(Reporting by Julie Zhu and Kane Wu; Enhancing by Sumeet Chatterjee and Muralikumar Anantharaman)