China tour provider gets $500m from JD.com, PE investors

The company said in a statement that JD would purchase $350 million worth of Class A ordinary shares and contribute a further $100 million in resources as part of a strategic agreement. Hony Capital will invest $80 million, while DCM, travel booking site Ctrip and Temasek Holdings will each put in $20 million, and Sequoia Capital will contribute $10 million.

JD.com will become the single largest shareholder in Tuniu with a 27.5% stake. The shares are priced at $16 per American Depository Share (ADS), below the May 7 close of $17.26. Tuniu's stock ended the following day up 4.46% at $18.03.

The deal comes less than six months after Hony and JD led a $148 million round of funding for Tuniu, each purchasing $50 million in new shares. Ctrip invested $15 million and the company's CEO and COO put in $16.5 million apiece. The initial plan was to raise $100 million through a public offering, but then Tuniu's share price dropped sharply - said to be the work of short-sellers - and it was decided that a private round would be the best course of action.

While most travel e-commerce companies in China - with Ctrip being the largest player - primarily offer hotel and flight bookings through partnerships with travel agencies and hotel operators, Tuniu focuses on packaged tourism. It provides lead generation to the offline tourism agencies that have traditionally dominated this space.

The company, which went public last May through a $72 million IPO, sold 2.18 million organized and self-guided tours in 2014, up from 1.28 million the previous year. It has 75 service centers located in 73 cities across China and a team of 650 tour advisors. Revenue came to RMB3.53 billion ($569.7 million) in 2014, compared to RMB1.95 billion in 2013. However, net losses widened from RMB79.6 million to RMB447.9 million.

The agreement with JD will see Tuniu awarded the exclusive rights to operate JD's leisure travel channel for a period of five years, offering packaged tours, cruise holidays, tourist attraction tickets, train tickets, car rental services and via processing services. It will also become the e-commerce platform's preferred partner for hotel and air ticket booking services.

Gobi Partners was Tuniu's first VC backer in 2008, with DCM coming in for the second round two years later. The company raised $50 million in Series C funding in 2011 as Highland Capital Partners, Rakuten and Sequoia joined the investor roster. The Series D round came in September 2013 as Temasek put in $50 million and DCM re-upped to the tune of $10 million. DCM, Ctrip and Qihoo 360 also took part in a private placement alongside the IPO.

As of March 2015, DCM had a 16.4% stake in the business, Temasek had 11%, Gobi 9.4%, Sequoia 7.5%, and JD and Hony held 6.5% apiece.

DCM is participating in this latest round through the DCM Ventures China Turbo Fund, which makes follow-on investments in later-stage portfolio companies. The vehicle launched in September 2014 with a target of $170 million.

JD has received substantial private equity and venture capital backing and went public last year, raising $1.8 billion. It has made a number of strategic investments in Chinese technology companies and also launched an equity crowdfunding platform to support start-ups.

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• Topics
• PIPEs
• Greater China
• Technology
• Consumer
• PIPE
• China
• TMT
• Consumer
• JD.com
• Hony Capital
• Temasek Holdings
• DCM-Doll Capital Management
• Sequoia Capital