Didi seeks to raise $2b in car services spin-off ahead of IPO

Chinese ride-hailing giant Didi Chuxing has expanded into a number of markets worldwide, including South-east Asia, Brazil, Mexico and Australia, by either taking stakes in local ride-hailing firms or rolling out its own services.
Chinese ride-hailing giant Didi Chuxing has expanded into a number of markets worldwide, including South-east Asia, Brazil, Mexico and Australia, by either taking stakes in local ride-hailing firms or rolling out its own services.PHOTO: REUTERS

HONG KONG • Chinese ride-hailing giant Didi Chuxing Technology is looking to spin off its car services unit in a deal worth up to US$1.5 billion (S$2 billion), ahead of its expected initial public offering (IPO), people with direct knowledge of the matter said yesterday.

While Didi has never confirmed its plans for an IPO, the spin-off of what is an asset-heavy part of its business could be a step in that direction. Its IPO would be one of the biggest in recent years, given the company's current US$56 billion valuation.

Didi is among a number of Chinese companies that are actively looking to raise capital.

Its rival in the food delivery space, Meituan-Dianping, is planning a float in Hong Kong, backed by recent reforms in the financial hub that pave the way for tech firms with weighted voting rights to list.

Didi is hoping to raise US$1 billion to US$1.5 billion by spinning off its car services unit and has tapped long-term investor SoftBank Group, among others, the sources told Reuters.

It values the unit at between US$2 billion and US$3 billion, the sources added.

Didi declined to comment, while SoftBank did not respond to a request for comment. The sources declined to be named as the information was confidential.

The Chinese ride-hailing giant launched in April the car services unit - which brought together its car rental, sales, maintenance, sharing and gas services businesses.

At the time, the unit operated in more than 200 Chinese cities with a network of over 5,000 partners and downstream vendors.

Didi had said the unit's annualised gross merchandise value was expected to rise almost threefold to above 90 billion yuan (S$18.3 billion) by the year end.

The mobile app where users can hail taxis, privately owned cars, car pools and even buses in some cities remains Didi's core business.

Didi cemented its spot as China's top ride-hailing firm when it bought Uber's local operations in 2016.

It has since expanded into a number of markets worldwide, including South-east Asia, Brazil, Mexico and Australia, by either taking stakes in local ride-hailing firms or rolling out its own services.

The company has also launched a food delivery service to compete with Meituan-Dianping, China's dominant start-up in that area, which is planning an IPO of over US$4 billion in Hong Kong in the coming months.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 18, 2018, with the headline 'Didi seeks to raise $2b in car services spin-off ahead of IPO'. Print Edition | Subscribe