Just six weeks after Meituan and Dianping merged to form the largest on-demand services provider in China, Alibaba is seeking to sell their stake in the new company, worth approximately 7 percent, according to sources who spoke to the Wall Street Journal.
The stake is worth some $1 billion USD, the same amount that Tencent is reportedly preparing to invest in the new entity. Alibaba owned a stake in Meituan prior to the merger while Tencent held a stake in Dianping.
The newly formed company oversees a range of on-demand services including movie ticketing, restaurant booking and other services linking brick and mortar businesses to consumers via the mobile platform.
The match-up ended one of the biggest remaining industry rivalries between tech giants Alibaba and Tencent. At the same time it raised speculation that Alibaba and Tencent would potentially integrate their respective O2O food delivery services Koubei.com and Ele.me into the new platform, which also features some food delivery services.
It now appears that Alibaba will redirect resources to bolster Koubei.com, maintaining competition with Ele.me which is currently the country’s third-most funded startup in China, reaching an estimated valuation of $3 billion USD as of August 2015.
The new Meituan-Dianping entity is now in the process of raising fresh funds to fuel an expansion. The two companies had been engaged a financially exhaustive war of subsidies as they vied for early market share, an expense that would theoretically fall considerably once they ceased to compete.
Baidu injected $3 billion USD into their competing group-buying service Nuomi to remain competitive in the space.
Alibaba’s stock has fallen slightly since the beginning of the month but remains steady around the $0.78 cent mark since the close of their annual Single’s Day shopping event on the 11th of November.