January 20, 2016 / 11:00 AM / 4 years ago

China's Meituan-Dianping raises over $3.3 billion, values firm at $18 billion

BEIJING (Reuters) - Chinese Internet company Meituan-Dianping, akin to a mix of Yelp Inc and Groupon Inc, said it has raised over $3.3 billion in funding that valued the firm at more than $18 billion, in the biggest ever fundraising by a startup.

The fundraising outstrips compatriot Didi Kuaidi’s $3 billion announced in September, and comes amid growing concerns about valuations as Chinese Internet companies continue to spend heavily to tackle fierce competition.

“While money is slowly pulling out of the markets, top players in top markets can still raise staggering amounts,” said a fund manager at a venture capital firm, who declined to be named.

The latest fundraising round was led by Tencent Holdings Ltd, DST Global, TBP Capital, Singapore state investment firm Temasek Holdings [TEM.UL] and the Canada Pension Plan Investment Board.

Meituan, backed by Alibaba Group Holding Ltd and Dianping, with Tencent behind it, merged in October, to create China’s dominant player in services such as finding deals at local restaurants and booking cinema tickets through smartphones as well as group-buying of coupons and accessing ratings.

The merger came after the rivals had spent huge sums in a long and bitter battle for supremacy. Such heavy spending had gouged a chunk out of the companies’ balance sheets, putting their IPO plans on ice, according to people familiar with the matter. The merger was, in part, meant to reduce that cash burn.

But the battlefield is still stalked by well-funded competitors, like Baidu Inc, Alibaba’s own Koubei venture with its online finance arm Ant Financial Services Group, and Ele.me.

That reinforces the need for heavy spending. The quandary echoes that of Didi Kuaidi, a ride-hailing firm formed when the two companies merged to halt their costly rivalry. That hasn’t panned out, as Baidu-backed Uber [UBER.UL], the world’s most valuable venture-capital backed firm, seeks to grab a chunk of the market away from Didi Kuaidi.

With an $18 billion valuation, Meituan-Dianping would be the fifth-most valuable pre-IPO tech company in the world, according to market research firm CB Insights.

That is larger than the latest publicly available valuations for U.S. messaging app Snapchat, Indian e-commerce startup Flipkart and Didi Kuaidi.

In November, The Wall Street Journal and Financial Times reported that Alibaba was seeking to sell its roughly 7 percent stake in Meituan-Dianping for around $1 billion.

Additional reporting by Elzio Barreto in HONG KONG; Reporting by Paul Carsten; Editing by Susan Thomas and Muralikumar Anantharaman

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