Silver Lake leads $500m investment in China's Qunar

Silver Lake and an unidentified investor will subscribe to senior unsecured convertible notes with a 2% coupon and an initial conversion price of $55 per American Depository Share (ADS). The proceeds will be used to expand Qunar's mobile presence, grow its business lines and enhance its technology capabilities, according to a filing. The company has also announced an offering of up to 9.2 million ADS.

Qunar's stock has risen from around $27 in early April to nearly $53 on May 21. It closed at $44.09 on May 29, the last trading day before the company's first quarter results, Ctrip's unsolicited buyout offer - which was received on May 8 and rejected on June 1 - and the Silver Lake-led investment were announced. After reaching as high as $47.40 on June 1, the stock closed at $46.01.

"Chinese consumers are spending more money on travel and are increasingly using mobile devices to book their travel related activities. We believe the company is well-positioned to address these secular trends, and under the leadership of Qunar's strong senior management team, continue to deliver outstanding growth for the company," Zheng Wang, managing director at Silver Lake, said in a statement.

Qunar is similar to US-based Kayak.com in that it searches for the best flight, hotel and package trip deals offered by a range of travel agents and aggregates the results based on price. It generates revenue by selling sponsored search services and display advertising to travel agents as well as by providing web platform for travel agents with limited or no online presence.

The company received more than $25 million in funding from groups including GSR Ventures, GGV Capital, Mayfield Fund and Tenaya Capital before Baidu paid $306 million for a majority stake in the business in 2011. Qunar went public on NASDAQ in November 2013, raising $167 million. As of March, Baidu held a 51.43% stake in the company, while founder and CEO Chenchao Zhuang had 7.13%.

Qunar claims to operate China's largest retail flight distribution platform and its largest direct hotel network, covering 237,000 hotels at the end of 2014. It also offers over 500,000 vacation packages from more than 3,700 suppliers. In 2014, mobile accounted for 40.3% of total revenue, 40.5% of flights tickets sold and 56.4% of hotel room nights stayed.

Revenue came to RMB1.76 billion ($283.1 million) in 2014, up from RMB850.9 million the previous year, while net losses increased to RMB1.85 billion from RMB187.3 million. The bottom line was impacted by various one-off and non-cash expenses, as well as by online marketing expenses tied to a cooperation agreement with Baidu that has been replaced by another pact that involving Baidu Maps. Once these items are excluded, the net loss for 2014 was RMB810.7 million, up from RMB83.9 million.

Ctrip provides accommodation reservation, transportation ticketing, packaged tour and corporate travel management services. Its revenue and net profit came to RMB7.45 billion and RMB91.6 million in 2014. Last month - after submitting the offer for Qunar - it took a 37.6% stake in rival operator eLong for $400 million and received an additional $250 million from US-based Priceline Group.

Silver Lake, which has $26 billion in assets under management, specializes in technology investments. Its major success in Asia has been China's Alibaba Group. The GP invested around $500 million, took $278.8 million off the table as part of a $25 billion IPO in September. Its remaining 2.2% holding was worth $3.7 billion based on the IPO price.

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• Topics
• Technology
• Consumer
• Greater China
• PIPEs
• China
• PIPE
• Growth capital
• Consumer
• TMT
• Baidu
• Silver Lake