Tencent-backed Meituan starts taking orders for US$4.4 billion IPO

Meituan Dianping application icons on an Apple Inc. iPhone in an arranged photograph taken in Hong Kong, China, on Friday, March 23, 2018. Meituan Dianping, the Chinese food reviews and delivery giant backed by Tencent Holdings Ltd., has begun discussions on a Hong Kong initial public offering as soon as this year, according to people familiar with the matter. (Bloomberg pic)

HONG KONG: Meituan Dianping, the Chinese restaurant reviews and delivery giant backed by Tencent Holdings Ltd, started taking orders for a Hong Kong initial public offering that could raise as much as US$4.4 billion.

The company is offering 480.27 million new Class B shares at HK$60 to HK$72 apiece, according to terms for the deal obtained by Bloomberg on Tuesday. Five cornerstone investors including Tencent have agreed to buy a combined US$1.5 billion of stock in the offering, the terms show.

Meituan’s IPO will bankroll its costly expansion into businesses from ride-hailing to finance as it pursues an ambition to become a super-app in the vein of Tencent’s own WeChat. That sets it up for a clash with Alibaba Group Holding Ltd, which is spending billions to try and seize control of China’s US$1.3 trillion food delivery and online services industry.

In ride-hailing, it’s taking on Didi Chuxing, the startup that defeated Uber Technologies Inc in China. Meituan’s IPO filings show a company growing rapidly but also haemorrhaging cash: it lost US$2.9 billion in 2017 alone.

Tencent has committed to buy US$400 million of stock in Meituan’s IPO, while Oppenheimer agreed to invest US$500 million, the terms show. Darsana Capital Partners will purchase US$200 million of shares, while fellow hedge fund Landsdowne Partners agreed to invest US$300 million. The China Structural Reform Fund committed to purchase $100 million, the terms show.

Meituan expects to take investor orders through September 12 and price the offering that day during US Eastern hours. It aims to start trading September 20, the terms show. Goldman Sachs Group Inc, Morgan Stanley and Bank of America Corp are joint sponsors of the offering, while China Renaissance Holdings Ltd is sole financial adviser.

Chief Executive Officer Wang Xing founded Meituan.com in 2010 as a group-buying site similar to Groupon Inc before a 2015 merger with Dianping, which provided reviews of restaurants and other local businesses. Wang will remain controlling shareholder after the company lists, according to Meituan’s preliminary prospectus.

Meituan would be only the second company to list with weighted-voting rights in Hong Kong, after smartphone maker Xiaomi Corp. priced a US$5.4 billion share sale in June. The city’s market regulators tweaked rules this year to try and attract more of China’s tech darlings, which like Alibaba have previously favoured the US.

It’ll try to get investors to focus on its rapid top-line expansion, in the tradition of Amazon.com Inc and other fast-growth firms that bled money for years. It remains to be seen if the market will overlook its significant spending on marketing.