Tencent, Ctrip-Backed Travel Company Plans Hong Kong IPO

03/08/18 04:19 AM EST
By Julie Steinberg and Liza Lin 

Chinese internet giant Tencent Holdings Ltd. may soon have another opportunity to cash in on one of its investments.

Tongcheng-Elong Holdings Ltd., a travel company backed by Tencent and China's largest travel website Ctrip.com International Ltd., is planning an initial public offering in Hong Kong in the second half of this year, according to people familiar with the matter. The Chinese company could raise between $1 billion and $1.5 billion in its share sale, one of the people said.

Many Chinese companies backed by Tencent have either gone public recently or are planning IPOs this year, benefiting from strong investor interest in part because of Tencent's strong growth. Its Hong Kong-listed shares have doubled from a year ago.

Tongcheng-Elong was formed after a December 2017 merger between two online travel-service providers backed by Tencent and Ctrip. Before the combination, Elong was listed on Nasdaq for more than a decade and was taken private in 2016 after Ctrip, previously a rival, took a stake in it.

Tencent and Ctrip are the biggest shareholders in Tongcheng-Elong. They own about 45% of the company, according to a person familiar with the firm's structure. Other shareholders include Dalian Wanda Group and private-equity firm Ocean Link, the person said. Tongcheng literally stands for "same trip" while Elong stands for "artistic dragon," representing its site's logo.

The company runs internet portals offering domestic and international travel services and operates in an online travel market dominated by its parent company Ctrip, Alibaba Group Holding Ltd.'s Fliggy and another Ctrip affiliate Qunar Cayman Islands Ltd.

Tongcheng allows customers to buy flight tickets, book accommodation and travel tours, while Elong's main business offers accommodation including hotels and guesthouses. The combined company is seeking to raise funds to better compete with new and existing rivals in the budget travel market, according to a person familiar with the matter.

Rising wealth is boosting travel demand from China, and the country is the biggest source of tourists globally. Chinese tourists made 4.53 billion trips domestically and internationally last year, almost three times the number of trips made by Americans, according to a recent report from the Chinese Academy of Social Sciences, a think tank.

The bulk of Tongcheng-Elong's customers come from Tencent-run social-media apps WeChat and QQ, which both offer access to the site, a person close to the company said. The firm hopes to leverage that advantage and its ties to Ctrip's large base of suppliers to expand, the person said.

Tongcheng-Elong hasn't disclosed sales or profit figures, but the size of the IPO it is targeting indicates the company has a valuation of several billion dollars. Just before Elong was taken private, the company reported 2015 sales of 1 billion yuan (US$158.1 million) and had a market capitalization of about $660 million, according to S&P Global Market Intelligence.

Tencent has been one of the biggest beneficiaries of frenzied investor demand for China technology-related shares in the past year. Recent IPOs of Tencent-linked companies have drawn record subscription rates and their shares surged in value upon listing.

China Literature Ltd., an online library and audio books business that went public in November, notched more than $100 billion in investor orders for the company's stock sale. Its shares nearly doubled on their first trading day, though they have since fallen 28% since. Shares of Sogou Inc., a search engine in which Tencent owns a 38% stake, have declined a similar amount since November.

Another affiliated company, Tencent Music Entertainment Group, is planning an initial public offering this year, The Wall Street Journal has reported. It was recently valued about $12.5 billion, according to a recent securities filing from music streaming company Spotify Technology SA, which owns a 9% stake in Tencent Music.

Write to Julie Steinberg at julie.steinberg@wsj.com and Liza Lin at Liza.Lin@wsj.com


(END) Dow Jones Newswires

March 08, 2018 04:19 ET (09:19 GMT)

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