According to four independent sources, Tencent Holdings plans to sell its USD 80-billion stake in Meituan to satisfy domestic regulators and monetise an 8-year investment. Tencent, which owns 17 percent of Meituan, has been working with financial advisers to determine the most profitable way to sell its stake.
Tencent, the owner of China’s No. 1 messaging app WeChat, invested in Meituan’s rival Dianping in 2014, merging with Meituan just one year later. Tencent’s 17 percent stake in Meituan is worth USD 24.3 billion, according to Meituan’s market capitalization as of last Monday. If market conditions are favorable, Tencent will begin the sale this year.
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A sweeping regulatory crackdown in China since late 2020 has targeted technology heavyweights who have been taking advantage of stake acquisitions and domestic market concentrations to build their empires. Over the past few years, laissez-faire policies have driven rapid growth and dealmaking.
The Chinese regulators have been appeased, but Tencent has also been reducing its holdings in order to book big profits on its bets. According to its quarterly reports, its shareholdings in listed companies excluding its subsidiaries dropped from USD 201 billion last year to USD 89 billion as of end-March.
“The regulators are apparently not happy that tech giants like Tencent have invested in and even become a big backer of various tech firms that run businesses closely related to people’s livelihoods in the country,” explained one source. Following the Reuters report, Meituan shares fell more than 10 percent, while Tencent shares declined more than 2 percent.
Earlier this year, Tencent divested 86 percent of its stake in JD.com for USD 16.4 billion, weakening its ties to China’s second-biggest e-commerce company. A month later, it raised USD 3 billion by selling a 2.6 percent stake in Singapore-based gaming and e-commerce company Sea, a move to monetise its investments and adjust its business plan.
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Based on two sources, a block trade on the public market is likely to be used to sell the Meituan holding, which typically takes a day or two to complete. In comparison to a private buyer, it would be a fast and smooth way for Tencent to offload the shares.