Boston, MA 04/08/2014 (wallstreetpr) – Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) which operates online travel services such as hotel accommodation, packaging tours and airline tickets, is reportedly in merger or partnership talks with Qunar, according sources with direct knowledge of the discussions.
CTRP is a $7 billion company which is based in China. Qunar is also a travel solutions company, mostly providing booking services. The company is majority-owned by Biadu, China’s leading Internet search engine provider. Baidu acquired majority stake in Qunar in 2011 following a $306 million transaction. According to the most recent SEC filing, Baidu controls 58.6 percent stake in the travel services company.
The talks so far
The two companies are reported to be exploring a range of options towards a tie-up. They could end up under a merger deal or even a partnership arrangement, according to sources. However, the talks are still in preliminary stages and a deal is not guaranteed. Moreover, no financial deals or even structure of the tie-up have been discussed or otherwise agreed upon. Thus, it also remains unknown to this point which company in the deal will enjoy control over the other.
Why Qunar may be interested in big stake
Qunar which is majority owned by Baidu might seek to gain an upper hand in the deal with Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) for some reason or other. Baidu is trying to increase its search advertisement revenue against rivals Tencent Holding and Alibaba Group. Thus, the company is trying to acquire strategic firms and having majority stake in the tie-up deals performed by its subsidiaries seems to be very much on the cards.
Furthermore, the prospects in the Chinese travel market makes it likely that Baidu might be interested in gaining control of the leading travel companies in the country. Projections are that online travel market will hit 465 billion yuan or $75 billion in China by 2017. The increasing number of Chinese middle-class is expected to fuel more spending on entertainment and leisure, which will be good news for travel companies like Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) and Qunar.
If the deal goes through
If Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) and Qunar sail through with a tie-up, the resulting company is expected to have more than $10 billion in valuation. The fact that the two companies serve different niches also makes a lot of sense regarding the anticipated tie-up. It so happens that while CTRP serves mostly call center customers, Qunar mostly serve booking needs.
