LY.com, a leading player in China’s local attraction ticket arena, announced on Sunday it’s going to merge Wanda Tourism, the traveling arm of Chinese real estate conglomerate Dalian Wanda Group, with a mixture of cash and stock.
After the transaction, LY.com’s market valuation will exceed 20 billion RMB (around $2.98 billion USD) with a cash deposit of over 5 billion RMB ($746 million USD), according to a company statement.
Together with the news, LY.com, formerly 17u.com or Tongcheng, revealed that its management has injected a combined 1 billion RMB ($149 million USD) into the company, which means that its founding team still holds a decisive voting position. The statement emphasized that major shareholders Wanda Group, Ctrip and Tencent all support the independent development of LY.com.
Wanda Group set up Wanda Tourism in 2013 as a major effort to expand beyond its home turf in the real estate industry. Over the past few years, the firm has acquired twelve local travel agencies in major cities, hitting annual revenue of 12 billion RMB ($1.7 billion USD) in 2015.
Under the deal, the twelve travel agencies owned by Wanda Tourism will be integrated into LY.com’s resort and scenic sport travel business, one of two independent departments the firm has set up after a major structure overhaul in June this year. The other business segment is dedicated to online sales for plane tickets, train tickets and hotel reservations.
Wanda Group is in the consortium which has poured overall 6 billion RMB funding ($895 million USD) in the ticketing website last year and the current deal is just another step for the two companies to further integrate their online and offline resources.
After the fundraising last year, the company has initiated its A-share listing plan and the current deal is aimed at fueling the IPO plan with the addition of new assets.
“Upon the completion of this merger, LY.com is expected to generate profits in 2017. We forecast the revenue for 2018 to reach 50 billion RMB ($7.45 billion USD) while the net profits surpassing 2 billion RMB. ($298 million USD)” said company founder and CEO Wu Zhixiang.
It is worth noting that rumor goes around that Wanda Group failed to offer the capital it promised in last year’s transaction, so the current merger of Wanda Tourism is used to fill in the gap. LY.com’s CEO Wu dispelled the speculation in an interview with local media CBN. “All the 6 billion RMB investment has long been in position after the press conference back then, including Wanda’s funding.”
However, LY.com, an internet startup, does have a tough road lying ahead in integrating businesses with a traditional company.