ELong, one of China’s largest online travel services, today announced that its board of directors have received a privatization offer from existing shareholder Tencent, which hopes to acquire all remaining shares in the company.
Tencent offered shareholders $18 per American Depositary Receipt (ADR), a 27 percent premium to Monday’s closing price in New York, according to a statement on PR Newswire. Elong’s ADRs slid 1.9 percent to $14.22 USD in Monday trading in New York before the company’s statement. Tencent currently holds around 15.0% of the aggregate voting power of the company.
The Board intends to form a special committee to consider the proposal and plans to authorize the special committees to retain legal and financial advisors to assist it in evaluating the transaction.
This year many U.S.-listed Chinese companies have received privatization offers. Strong growth in Chinese stocks over the last 18 months has attracted companies back home, despite instability recently that has seen the market dip into bear territory. Despite woes that delisted companies would be shut out of the Chinese market, players like eLong continue to consider privatization offers.
ELong yesterday reported its second quarter unaudited financial results, which were below expectations. Net revenue decreased 25% to 218.5 million RMB ($35.2 million USD) from last year. Accommodation reservation revenue decreased 22% compared to the same period in 2014, reportedly due to the growth of their aggressive coupon program that cut the price of bookings. Transportation ticketing revenue decreased 30%, primarily due to a decrease in air commission revenue per ticket.
Fierce Competition in The Chinese Travel Sector For eLong
Chinese outbound travelers are increasing. In the first four months of the year, total airline passenger traffic was up 11.8% from a year earlier, accelerating from 9.4% for the entire preceding year year, which has fueled investor interest in the market. As the travel market competition becomes increasingly fierce, internet giants have made a strong pitch to join the market.
Here are the major companies’ recent performance.
Ctrip – Ctrip, the trip-booking website today also reported its unaudited second quarter of 2015 financial results. Net revenues were 2.53 billion RMB ($408 million USD), up 47% year-on-year. Accommodation reservation revenue increased 45% year-over-year, and transportation ticketing revenues increased 45% year-over-year, according to the company.
The company purchased a 38 percent stake in its longtime competitor Elong in May, becoming the company’s biggest shareholder. Other shareholders include Keystone Lodging Holdings Limited and Plateno Group Limited together, along with Tencent.
This May, overseas online travel service company Priceline Group Inc. invested in Ctrip.com International, Ltd., China’s leading online travel company to hold 10.5% of Ctrip’s shares.
Qunar – Ctrip and Baidu-backed Qunar take up two-third of the market. They discussed merging this year. Qunar rejected a bid by Ctrip, reportedly because of Qunar’s controlling shareholder, Baidu. Qunar has been growing its open platform project over a large user base.
LY.com – China’s ticketing website LY.com landed nearly $1 billion USD funding led by Wanda group last month, its existing investors include Tencent, Oriza, Boyu Capital as well as its major rival Ctrip.
Expedia – Expedia recently divested their controlling share in Elong to Ctrip and other companies, but its China focus is still intact. The company has commercial agreements which allow it access to outbound Chinese travelers through Ctrip and eLong. Brand Expedia has a presence in Hong Kong, with future expansion planned in China.
Alitrip – In October last year, Alibaba also made a play in the market by launching online journey service, Alitrip.
Image Credit: eLong