Chinese company Tencent Holdings plans to sell all or most of its US$24 billion (R400 billion) stake in food delivery firm Meituan to appease domestic regulators and monetize the eight-year-old investment, four sources familiar with the matter said.
Tencent, which owns 17% of Meituan, has been engaging with financial advisers in recent months to figure out how to execute a potentially large sale of its Meituan stake, the three sources said.
Tencent, owner of China’s largest messaging app WeChat, first invested in Meituan rival Dianping in 2014, which then merged with Meituan a year later to form the current company.
Based on Meituan’s market capitalization as of Monday, Tencent’s 17% stake is worth $24.3 billion.
Tencent aims to launch the sale this year if market conditions are favorable, the two sources said.
The planned sale comes amid a sweeping regulatory crackdown in China since late 2020 against tech heavyweights who have aimed to build their empires through stake acquisitions and concentration of domestic market power.
The regulatory crackdown happened after many years laissez-faire an approach that drove growth and deals at breakneck speed.
Tencent is cutting its holdings partly to appease Chinese regulators and partly to reap big profits from those bets, three of the sources said. The value of its stakes in listed companies, excluding subsidiaries, fell to $89 billion at the end of March from $201 billion a year earlier, according to quarterly reports.
“Regulators are apparently not happy that tech giants like Tencent have invested in and even become big patrons of various tech firms that run businesses that are closely linked to the country’s livelihoods,” one of the sources said.
Tencent declined to comment. Meituan did not respond to a request for comment. All the sources declined to be named due to confidentiality restrictions.
In December, Tencent announced a $16.4 billion sale of about 86% of its stake in JD.com, loosening its ties with China’s second-largest e-commerce company.
A month later, it raised $3 billion by selling a 2.6% stake in Singaporean gaming and e-commerce company Sea, which was seen as a monetization of the investment while adjusting its business strategy.
The potential sale of the Meituan holding is likely to be carried out through a block transaction in the public market
Tencent has not linked the sale of JD.com and Sea shares to the regulatory crackdown.
The potential sale of the Meituan holding is likely to be done through a block transaction on the public market, which typically takes one to two days from marketing to completion, according to two sources.
They added that it would be a quick and smooth way for Tencent to offload the shares, compared to handing them over as a dividend or negotiating with a private buyer. — Julie Zhu and Kane Wu, (c) 2022 Reuters