October 8, 2015 / 7:11 AM / 4 years ago

CORRECTED-UPDATE 1-China's Meituan, Dianping merging to form dominant O2O player

(Corrects last paragraph to show Dianping raised more than $800 million, not $800 billion)

* China’s leading online-to-offline firms merging

* Deal to give merged entity as much as $20 bln valuation-FT

* Comes after merger of taxi-hailing firms into Didi-Kuaidi

BEIJING, Oct 8 (Reuters) - China’s Meituan.com and Dianping Holdings, the country’s biggest online-to-offline (O2O) service providers, said on Thursday they are merging, marking the latest multi-billion-dollar consolidation in the country’s booming Internet sector.

Meituan is part-owned by Alibaba Group Holding Ltd while Dianping is backed by Alibaba’s fierce rival Tencent Holdings Ltd.

The merged company could be valued at as much as $20 billion, according to the Financial Times. It could pose a threat to the plans of Baidu Inc, China’s top Internet search engine, which has unveiled plans to invest $3.2 billion in O2O over the next three years.

Financial details of the deal were not immediately disclosed, but the transaction comes after Didi Dache and Kuaidi Dache, two leading taxi-hailing firms, combined similarly in a share swap worth $6 billion earlier this year.

Zhang Tao and Wang Xing, the respective chief executives of Dianping and Meituan, will become co-CEOs of the yet to be named new company, which will offer users group-buying coupons and business ratings similar to Yelp Inc and Groupon Inc .

The companies said they would retain their respective brands and management structure and independently operate their businesses.

The Didi-Kuaidi deal prompted speculation among China’s tech investors and bankers that more such mergers might follow, given the intense and often unprofitable competition between leading companies in China’s Internet sector.

Speculation of a merger between Dianping and Meituan had swirled in early 2015, as Dianping finished raising more than $800 million in capital at a valuation of $4 billion. (Reporting By Matthew Miller and Gerry Shih; Editing by Muralikumar Anantharaman)

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