By Josh Beckerman
NEW YORK-- Tencent Holdings Ltd. wants to buy the rest of
Chinese travel company eLong Inc., as the Internet conglomerate and
its rivals look to benefit from China's growing legions of
travelers.
Tencent is offering $18 per American depositary share in a
preliminary, nonbinding proposal, eLong said Monday. That is a 24%
premium to Friday's closing price.
Tencent already owns stakes in eLong that give it effective
control of about 15% of the company, which had a market
capitalization of about $521 million before the offer was made.
In after-hours trading Monday, eLong's ADSs rose 10% to $15.65.
The company said its board will form a special committee to
consider the offer.
A Tencent spokeswoman said the company hopes "to capture the
promising potentials in the travel sector." She also said the offer
was part of its strategy to link users with online and offline
services.
Tencent owns China's popular WeChat mobile messaging service, as
well as electronic messaging platform QQ and a videogame business
that offers a number of popular titles. The company, based in the
southern Chinese city of Shenzhen, is competing with Chinese rivals
Alibaba Group Holding Ltd. and Baidu Inc. to capture the growing
number of Chinese who use mobile services for everything from
buying movie tickets to transferring money with their
smartphones.
All three are increasingly investing in travel. Boston
Consulting Group estimates that by 2030, tourists from China will
make up about 40% of outbound Asian travelers, taking 1.7 billion
trips annually, up from 500 million trips taken in 2012.
ELong also said it swung to a second-quarter loss of 360 million
yuan ($58 million) as revenue declined. Hotel revenue was lower in
part due to an "aggressive" coupon program, and transportation
revenue fell as major Chinese airlines lowered their base air
commission rates.
In May, Expedia Inc. sold its majority stake in eLong for $671
million to a group of buyers including Ctrip.com International
Ltd., Keystone Lodging Holdings Ltd., Plateno Group Ltd. and
Luxuriant Holdings Ltd. Expedia's involvement with eLong dated back
to 2005, when Expedia's then-parent IAC/InterActiveCorp. took a
controlling interest in the Chinese company.
Carlos Tejada in Beijing contributed to this article.
Write to Josh Beckerman at josh.beckerman@wsj.com
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