Alibaba Group Reportedly Seeks To Sell Stake In Chinese Technology Startup

(RTTNews) - Alibaba Group Holding Limited (BABA) is looking to sell its stake in China's leading online provider of movie ticketing, restaurant bookings and other on-demand services as it builds a competing platform of its own, the Wall Street Journal reported citing people familiar with the matter.

The report noted that Alibaba is shopping its roughly 7% stake in the company created by last month's merger of two rival startups: Meituan.com and Dianping Holdings Ltd., whose respective group-buying and restaurant-booking services are similar to those of Groupon Inc. and Yelp Inc. of the U.S.

The Alibaba deal could be worth roughly $1 billion, based on the valuations being discussed in Meituan-Dianping's current fundraising round, the report said.

However, the report note that that investors are seeking a discount on Alibaba's stake because Meituan-Dianping is offering investors a "ratchet" clause in its continuing fundraising round. That means investors would be given additional shares if the company's future initial-public-offering price is below the valuation they pay in this current round. Alibaba's stake doesn't offer a prospective buyer those same terms.

Alibaba's move to exit its investment in Meituan-Dianping comes as rival Chinese Internet company Tencent Holdings Ltd. is planning a $1 billion investment in Meituan-Dianping.

Meituan-Dianping is raising fresh funds from investors to finance its expansion plans. The company has been seeking to raise as much as $3 billion from investors, putting it at a roughly $20 billion valuation including the fresh capital, the report said.