Meituan, Dianping merger set to create an O2O giant

Liu Xuwei, an analyst at Beijing-based Internet consultancy Analysys International, said it remains to be seen how the former competitors can thrive after the merger.

"Meituan and Dianping accounted for more than 80 percent of China's group-buying market. Their businesses are highly overlapping and competing interests exist among their own partners."

For instance, selling movie tickets online is part of Meituan's key business, but Dianping is currently working closely with other ticketing service websites such as mtime.com.

"In the short term, the merger will help the two companies save costs, like reducing discounts to consumers. But it will be a long-term challenge for the two companies to prosper along with each other," Liu said.

What further complicates the deal is that Alibaba, an investor in Meituan, is marching into the market with its own brand of on-demand local services.

The e-commerce giant invested 6 billion yuan to set up Koubei.com in June.

"It is also unclear how Alibaba's Koubei will interact with the newly merged company in the future," Liu said.

Key numbers

・ $15 billion

The combined value of the company formed by the Alibaba Group Holding Ltd-backed Meituan and Dianping, an affiliate of Tencent Holdings Ltd, according to people familiar with the matter. That would make it the largest merger in China's Internet industry based on combined valuations.

・ 7.2 trillion yuan (about $1.13 trillion)

The size of China's location-based services market by 2017, according to Internet researcher iResearch Consulting Group. Location-based services include restaurant bookings, food deliveries and movie-ticket purchases.

・ 82 percent

The combined market share that the new entity would have in China's group-buying market. Meituan accounted for 52 percent of the group-buying market during the first six months of the year, followed by 30 percent for Dianping and about 14 percent for Baidu Inc's Nuomi, according to researcher Analysys International.

・ 1 trillion yuan

The transaction volume that Meituan expects to achieve by 2020, according to its founder Wang Xing. Meituan had more than 20 million active daily mobile users and operates in about 1,000 cities.

・ 90 million

Number of user-generated reviews on Dianping's sites, which are similar to Yelp Inc. Dianping operates in more than 2,500 cities and 200 countries, including the United States, according to its website.

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