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Ctrip, Qunar Tie Up to Form China’s Biggest Travel Agency

| Oct 27, 2015 07:08 AM EDT

Ctrip.com, an online travel agency, has agreed to collaborate with Qunar in a partnership to create the largest online travel service.

Online travel company Ctrip.com International Ltd. and its rival Qunar Cayman Islands Ltd. have agreed to form a share-swap partnership to create China's biggest online travel service, the China Daily reported.

In a statement released on Monday, Oct. 27, Ctrip said that under the deal, it will own 45 percent of Qunar, while Baidu, which owns 20 percent of Qunar, will have a 25 percent stake in Ctrip.

The partnership will also enable the two companies to combine products and services, the report added.

The deal came five months after Qunar denied Ctrip's buyout offer amid fierce competition for online bookings in China, where it is experiencing a surge in travel due to rising incomes and an expanding middle class.

"It's good for both companies," Henry Guo, managing director at Summit Research Partners LLC, said. "Competition between the two companies has hurt both of them in terms of profitability as there's been some irrational pricing."

According to data compiled by Bloomberg, the two companies will have a combined market value of $15.6 billion as Qunar is the second largest online travel agency in China.

Thompson Reuters data showed that Ctrip had a market valuation of $10.6 billion, while the smaller Qunar is valued at $5.2 billion.

Data compiled by Bloomberg showed that the acquisition would add to the $62.5 billion of Internet deals involving Chinese companies during the previous year.

The report said that President Liang Jianzhang and Co-President Su Jie will join the Qunar board, while two senior managers from Baidu, including Chairman Li Yanhong and Vice President Ye Zhuodong, will sit on the Ctrip board.

"Baidu expects to continue its existing business cooperation with Qunar," Ctrip said in the statement.

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