Online food giant Meituan Dianping set to launch IPO

China's food-review and delivery giant Meituan Dianping owns Meituan Waimai, a delivery service that accounts for about 60 per cent of its sales.
China's food-review and delivery giant Meituan Dianping owns Meituan Waimai, a delivery service that accounts for about 60 per cent of its sales.PHOTO: AGENCE FRANCE-PRESSE

Last valued at $41 billion, it seeks to raise $5.5b in listing this week

HONG KONG • Meituan Dianping's initial public offering (IPO) demands a nemesis discount. The fast-growing Chinese food-review and delivery unicorn plans to start taking some US$4 billion (S$5.5 billion) of orders for shares this week.

Since it kicked off its listing process in June, Alibaba has intensified the rivalry. Considering that Mr Jack Ma's e-commerce titan used to be a Meituan investor, bad blood should be factored into the valuation.

Founder Wang Xing's sprawling outfit has some firepower behind it, too. Chinese Internet giant Tencent is a backer. Meituan's approximately 300 million monthly users helped nearly treble sales last year to about US$5 billion.

Although it is unprofitable, operating losses shrank by 40 per cent to some US$550 million. Last valued at US$30 billion (S$41 billion), the IPO could vault it to as much as US$55 billion, Reuters reported.

The biggest draw amid the firm's ventures is Meituan Waimai, its on-demand delivery business, which accounts for about 60 per cent of sales.

The trouble is that Alibaba, which offloaded its stake in Meituan after it merged with a Tencent-backed rival in 2015, wants a bigger piece of the action. It took full control of the Ele.me takeout business in April before uniting it last month with Koubei, a Yelp-like review affiliate, to create a one-stop food shop similar to Meituan Dianping's.

What's more, Alibaba brought in the formidable Japanese company SoftBank to participate in a more-than-US$3 billion fund-raising for the enlarged group.

  • 300m

    Meituan Dianping's approximate number of monthly users, who helped nearly treble sales last year to about US$5 billion.

Finally, it just started 88 VIP, a programme that generously awards customers for using multiple services across the Alibaba empire, including Ele.me.

During a discussion of Alibaba's latest results last month, chief financial officer Maggie Wu described on-demand delivery as "a must-win and a must-have" market. That portends a brutal battle of cash-burning subsidies that could last a good long while.

Meanwhile, Meituan is going up against Didi Chuxing in ride-sharing, bought bike-sharing startup Mobike and runs an Airbnb-like home rental service, too.

That makes the idea of funding a company with a deep-pocketed arch-enemy girding for a toe-to-toe brawl that much more worrisome.

REUTERS

A version of this article appeared in the print edition of The Straits Times on September 04, 2018, with the headline 'Online food giant Meituan Dianping set to launch IPO'. Print Edition | Subscribe