General Atlantic to invest $150m in China's Jumei alongside IPO

Jumei's earlier filing - made prior to the agreement with General Atlantic - included a capital-raising target of $400 million. The company now plans to sell 9.5 million American Depository Shares (ADS) at between $19.50 and $21.50 apiece. Underwriters have the option of taking it to 10.92 million shares.

Jumei's existing investors include Sequoia Capital and K2 Partners - a private equity firm co-founded by Keyi Chen and China Renaissance Partners in 2010 - which hold 18.7% and 10.3%, respectively. They will not sell any shares in the IPO but their stakes will be diluted to 16.4% and 9.1%.

General Atlantic has agreed to buy Class A ordinary shares at the IPO price. Assuming the offering prices at the mid-point of the range, $20.50, the private equity firm would hold approximately 7.3 million shares. If the pricing exceeds the indicative range, General Atlantic could choose to terminate the private placement.

The company launched Junmei.com in 2010 and it had a 22.1% share of China's online beauty products market in 2013, based on analysis by Frost & Sullivan. Jumei also introduced a mobile platform, which has grown significantly, generating approximately 49% of the company's gross merchandise volume in the first quarter of 2014.

Jumei offers a combination of an online shopping mall, curated sales - selecting and recommending a collection of branded beauty products that are available for set periods of time - and deep-discount, limited availability flash sales. It works with around 1,700 suppliers and third-party merchants and had approximately 10.5 million active customers in 2013, up from 1.3 million two years earlier.

The company posted a net income of $25million in 2013, up from $8.1 million the previous year. Revenues jumped from $223.2 million in 2012 to $482.9 million in 2013.

According to a regulatory filing, Sequoia invested $4 million in the company through promissory notes in November 2010 and February 2011. These notes were fully discharged on completion of Jumei's Series A round in April 2011, which saw Sequoia, K2 and other investors commit $7.2 million. The Series B round came in November 2011 when Ventech China II SICAR and a Hong Kong investment company called Moon Wan Sun put in $6 million.

Sequoia is also an investor in Vipshop, which went public in 2012. Earlier this year, the company bought domestic cosmetics and fashion products site Lefeng for $132.5 million. The acquisition was said to be an attempt to broaden Vipshop's product offering. While the company is strong on flash sales for apparel, it has less experience in cosmetics and struggles to compete against Jumei.

Online sales of beauty products in China reached RMB22.6 billion ($3.7 billion) in 2013, up from RMB1.7 billion in 2010. They are expected to reach RMB94.6 billion in 2018, accounting for 21.9% of total retail sales of beauty products, compared to 10.2% last year.

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