Baidu to Buy 59% of Renren’s Group-buying Service Nuomi for $160 million

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Baidu, Inc. (NASDAQ: BIDU) and Renren  (NYSE: RENN)  jointly announced today a definitive agreement that the former will acquire a certain number of newly issued ordinary shares of Nuomi Holdings Inc., a wholly-owned subsidiary of Renren, representing approximately 59% of the equity interest in Nuomi, for $160 million in cash. The deal is expected to be closed in the fourth quarter of 2013.

Nuomi was launched in June 2010. As of Q2 2013, it had 3.8 million active paying users and made $6.2 million in revenue, according to Renren’s earnings release. So, on average each paying user spent no more than $2 in the quarter. The net loss for the quarter is $7.2 million.

The business recorded US$16.1 million in revenue for 2012. The operating loss for the year is $27.6 million, with $1.5 mn in cost of revenues and $42.2mn in operation expenses.

Meituan is another Chinese group-buying service launched three months earlier than Nuomi and currently one of the biggest in China, disclosed its annual revenue in 2012 was 5.55 billion yuan (a little less than $900 mn), more than 50 times of Nuomi’s.  The total transaction volume through it in 2012 is 5.55 billion yuan (a little less than $900 mn) (in Chinese). As Wang Huiwen, co-founder of Meituan, disclosed at our ChinaBang 2013 in early this year that their gross margin was about 7%.