Tencent Holdings may acquire a 16pct stake in online retailer and merge platforms

By Nicel Jane Avellana

Mar 08, 2014 07:52 AM EST

Chinese media reported that Tencent Holdings Ltd could unveil an agreement soon about the 16% holding it intends to get from JD.com, an online retailer. The acquisition would also lead to a consolidation of the shopping websites of both firms, Reuters reported.

Tencent is the biggest Internet firm in China while JD.com is the second biggest e-commerce firm in the mainland, possessing a market share of 13% in the rapidly growing online retail market. A deal between the two could allow them to close in on the market leader Alibaba Group Holding Ltd, the report said.

A Caixin report said that the agreement would pave the way for Tencent and JD.com to merge their e-commerce operations. Getting its information from unnamed sources in the company, China's major business daily said Tencent would move yixun.com and its other lesser known sites to the more popular platform of JD.com. Moreover, Caixin reported that the 16% stake was only the minimum. Tencent could choose to increase the holding in the online retailer to upwards of 20%. A deal may be publicly announced as early as Monday, the report said.

The use of mobile internet is rapidly increasing in China and Tencent, Alibaba and Baidu are trying to outdo each other in their quest to capitalize on the opportunity. New York-based market research firm eMarketer said increasing internet usage, rising middle-class incomes and an improved distribution network could lead e-commerce sales to go past the $180 billion mark this year, the report said.

Data from local app stores showed that most of Tencent's revenue is derived from computer games although its mobile games are also well-known. Over half of all users of smartphones in China also use their social messaging app WeChat, the report said.

Euromonitor figures showed that at least 50% of all online retail sales come from the Tmall marketplace of Alibaba while its Taobao platform, which works like eBay, holds a commanding 80% of all consumer-to-consumer sales online, the report said.

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