Mogujie, one of China’s biggest fashion-oriented e-commerce services, is taking over its major rival. Insiders revealed the information in the latest indication of a tougher fundraising environment and intensifying rivalry in the Chinese startup scene.
According to China Technology News, Mogujie.com, valued at approximately $1.7 billion in the company's most recent fundraising round, will effectively take over online-shopping competitor Meilishuo.com. Chinese social network giant Tencent Holdings Ltd. is Meilishuo's investor.
While terms could not be revealed immediately, the takeover will be through a stock swap. However, the two companies remained mum with regard to the issue.
Chinese startups in the Internet sector are coming together as investors become cautious concerning putting high valuations on corporations that are burning through money to compete with rivals, according to The Wall Street Journal. Shifts in investor perception, spurred partly by China's stock market turmoil since last year, have compelled entrepreneurs to tighten expenditure and consider mergers with rivals.
A Beijing-based social shopping site for women, Meilishuo had been attempting to raise fresh capital for months to no avail, but Hangzhou-based Mogujie finished its latest funding in November where it raised $200 million.
The agreement that precedes other mergers in China's startup sector comes amid volatility in the stock market. Reportedly, the market had its sharp decline since August and the shortest trading day in its 25-year history last week.
Meanwhile, Meituan.com and Dianping Holdings Ltd. agreed in Oct. 2015 to consolidate under one company.
Similarly, Chinese ride-hailing service Didi Kuaidi Joint Co., which is the most powerful local rival to Uber Technologies Inc., resulted from a merger last year.
Mogujie will take over the consolidated venture under the leadership of its chief executive, Chen Qi. However, Tencent will remain being a strategic investor in the combined corporation.
The takeover will establish a dominant player among services that specialize in women's fashion and consolidate online shopping with social networking.