Meituan-Dianping set for bumper Hong Kong listing

The initial prospectus does not disclose the size or pricing of the offering, but the company is reportedly seeking to raise more than $4 billion at a valuation of $60 billion – twice the valuation when it closed its Series C round last October. Meituan-Dianping has received substantial private equity and strategic funding. Tencent Holdings is the largest outside shareholder with approximately 20%.

Meituan-Dianping plans to list under a weighted voting right (WVR) structure that allows company founders to retain control even after their equity interest has fallen below 50% due to new share sales. The Hong Kong Stock Exchange began to accept WVR arrangements – although only for innovative companies of a certain size – earlier this year.

Smart phone maker Xiaomi became the first business to apply for an IPO using this structure. It is also the first company to win approval to issue Chinese Depository Receipts (CDRs), which enable large Chinese technology companies that are either listed overseas or structured offshore to sell shares in their domestic market. Meituan-Dianping is expected to issue CDRs as well.

The company was created in October 2015 following the merger of two O2O players: Dianping, which was established in 2003 as a provider of online restaurant reviews and group-buying services; and Meituan, a group-buying site that emerged amidst fierce competition in 2010 and outlasted its rivals. Both companies expanded their service scope and ended up battling for market share, with increasingly large funding rounds going towards subsidies or commissions.

The merger – which saw Meituan co-founder Xing Wang become chairman and CEO – was followed by a $3.3 billion funding round that valued the combined business at $15 billion. The $4 billion Series C, led by Tencent, came about two years later.

Meituan-Dianping describes itself as China’s preeminent e-commerce platform for services, focusing on mass-market, essential and high-frequency usage categories. In 2017, the platform facilitated more than 5.8 billion transactions totaling RMB357 billion in gross transaction volume. It served 310 million users and 4.4 million active merchants nationwide.

In Meituan Waimai, the company claims to have the world’s largest on-demand delivery network with an average of 531,000 daily active delivery riders. The network completed approximately 2.9 billion deliveries in 2017. Earlier this year, bike-sharing start-up Mobike was added to the portfolio at an equity valuation of about $2.7 billion. It followed the launch of Meituan Dache, a pilot ride-hailing services program.

Food delivery accounted for 62% of revenue in 2017, with in-store vouchers, hotel reservations and travel bookings contributing 32%. The remaining 6% came from new initiatives such as cloud-based enterprise software systems, payment services, supply chain solutions, and merchant financing. The company posted RMB33.9 billion ($5.17 billion) in revenue for the year, up from RMB12.9 billion in 2016. Over the same period, its net loss expanded from RMB5.79 billion to RMB18.9 billion.

Sequoia Capital China was the first institutional investor in Meituan and remains a significant shareholder of the combined entity, with around 11.6%. Trustbridge Partners owns 3.6%, while Coatue Management, Hillhouse Capital, and Tiger Global Management have 3.2%, 3.1%, and 3%, respectively. No other financial investor has more than 3%.

Meituan-Dianping’s roster of backers includes the likes of: DST Global, China Capital Today Group, GIC Private, Ameba Capital, Ascendent Capital Partners, Bertelsmann Asia Investments, Ceyuan Ventures, Fidelity, Temasek Holdings, Canada Pension Plan Investment Board (CPPIB), H Capital, Huaxing Capital Partners, Joy Capital, Walden International, Panda Capital, Sinovation Ventures, Qiming Venture Partners, and Vertex China Ventures.

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• Topics
• Greater China
• IPO
• Technology
• China
• Meituan-Dianping
• TMT
• Tencent
• Sequoia Capital
• Trustbridge
• Hillhouse Capital Management
• Tiger Global Management