Investors of Meituan and Dianping, separately backed by Chinese technology giants Alibaba Group Holding Ltd and Tencent Holdings, have agreed to a merger deal which is expected to give the new local services platform a valuation of $17 billion, according to a NetEase report published on Wednesday, citing people familiar with the deal.
Shares of Meituan and Dianping in the merger are divided by 7:4, and a new round of financing worth between $2 billion to $3 billion will be injected into the new entity after the merger is completed, according to the report.
Meituan and Dianping now provide a variety of localised services in China, including restaurant discounts, reviews, movie bookings and food delivery services, which have been widely used across a majority of the population in the country. Beijing-based Meituan announced earlier that transactions on its platform exceeded 46 billion yuan ($7.2 billion) in 2014.
Despite Meituan's market share having reached 51.9 percent in China in the first half while Dianping snatched 29.5 percent, the two market leaders have nevertheless decided to unite, as the two firms have been "burning" real cash raised from investors to seize consumers from the other platform.
In the meantime, the two leading startups continue to be challenged by other smaller players in the market, including Nuomi.com, partially owned by another Chinese technology giant, Baidu. Baidu said it plans to inject 20 billion yuan ($3.1 billion) into Nuomi in order to boost its presence.
Mergers among technology-firm backed startups have not been rare in China. In February 2015, Didi Dache and Kuaidi Dache, two of China's leading taxi-hailing apps, which together own a market share of over 90 percent in the country, also announced a merger to create one of the largest smartphone-based transport services globally.
Didi and Kuaidi, backed by Tencent and Alibaba respectively, have been similarly dragged into price wars to combat with the other for a bigger market share before the merger deal.