Chinese dating app Momo buys VC-backed Tantan

Tantan’s shareholders will receive $600.9 million in cash plus 5.3 million newly issued Class A ordinary shares in Momo. The announcement prompted a 17.1% jump in Momo’s American Depository Shares (ADS), which closed at $35.75 on February 23. Each ADS represents two Class A shares. Based on the last closing price, the stock portion of the deal is worth around $94 million.

Tantan most recently raised $70 million in Series D funding in June 2017 led by Chinese video streaming site YY and Genesis Capital, with participation from SAIF Partners China and Zhongwei Capital. Previous investors include DST Global, Vision Plus Capital, LB Investment, DCM Ventures, KPCB, GX Capital, and Bertelsmann Asia Investments (BAI).

Founded in 2014, the company operates a location-based social search platform that connects mutually interested users, much like Tinder. While browsing other people’s profiles, a user can swipe right to like a profile, and if this is reciprocated a match, they can chat or have voice calls via Tantan’s in-app messaging tool.

At the time of the Series D round, Tantan had 60 million verified registered users, of whom about six million were daily active users. It claimed to be the largest social platform for people born after 1990, who account for more than 75% of total users. The platform has made more than five billion matches to date.

Momo, which is best known for its "flirting" function, launched in 2011 and had 81.1 million monthly active users as of December 2016. The app is downloaded free of charge and the company generates most of its revenue from subscription packages that include additional functions and privileges. Additional revenue comes from mobile games and marketing services.

The company has sought to position itself as a broader social networking and entertainment platform. Notably, in 2015, it launched a live video service that allows users to purchase virtual gifts and send them to other users hosting live shows. Last year, the function was extended so that users can send gifts to one another outside of the live video service.

"Our core position will continue to center on social networking and this acquisition enriches our product line in the social space. We will continue to invest and incubate more sub-brands to serve the social and entertainment needs of different demographics,” Yan Tang, chairman and CEO of Momo, said in a statement. Following the acquisition, the Tantan team will continue to operate apps under the Tantan brand.

Momo listed in December 2014 and six months later Tang tabled a take-private offer that valued the company at approximately $3.5 billion. He was working with Matrix Partners China, Sequoia Capital China, Huatai Ruilian Fund, Alibaba Group, and Yunfeng Capital. The bid was withdrawn in August 2016. As of December 2016, Matrix, Sequoia, and Yunfeng were all listed as shareholders in Momo.

The company posted revenue of $553.1 million in 2016, up from $133.9 million the previous year. Over the same period, net income rose from $13.7 million to $145.3 million. Momo’s market capitalization is around $7 billion.

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• Topics
• Greater China
• Trade sale
• Technology
• China
• TMT
• M&A
• SAIF Partners
• DST Advisors
• Vision Plus Capital
• DCM-Doll Capital Management
• KPCB China Management