Chinese online classifieds platform 58.com has announced Friday that it will purchase a 43-percent stake in competitor Ganji.com, a deal which is expected to boost their combined share of China’s online classified listings.
Under the deal, 58.com will pay $412.2 million in cash and about 34 million shares to Ganji.com's parent, Falcon View Technology Ltd., the Beijing-based company said in a statement. Yang Haoyong, the founder of Ganji.com, will also become one of the co-chief executives alongside 58.com's founder, Yao Jinbo.
The deal will also see e-commerce giant Tencent Holdings Ltd., which owns more than 25 percent of 58.com, investing an additional $400 million in shares in the company to limit the dilution of its current holding from the newly issued shares.
"We are pleased to make this large-scale strategic investment in Ganji.com to jointly realize major cost, revenue, and strategic business synergies," 58.com chairman Michael Yao said.
"This transaction is part of our larger plan to execute our vision of integrating our respective businesses and creating a larger and more effective local services Internet platform to help consumers around China find the services that they need in their local area."
Both companies will continue to operate their respective brands, according to a report from the Wall Street Journal.
58.com and Ganji are China's biggest classified ad websites, and a combination will help them increase market share and reduce costs, said Jeff Papp, a senior analyst at Oberweis Asset Management, Inc.
According to 58.com's March 8 earnings report, the company's marketing and sales expenses more than doubled in the fourth quarter to $60.4 million, while revenue rose by 77 percent to $80.2 million.
By combining operations, those costs will be reduced, said Jun Zhang, head of China Research at Rosenblatt Securities, Inc. in San Francisco.
Often described as China's Craigslist, 58.com is one of the biggest online classified marketplaces in the country and the largest Chinese IPO in the New York Stock Exchange. It offers a range of online advertising listings including job adverts, housing and used goods trading.