HONG KONG — WeChat owner Tencent Holdings and JD.com are to invest $863 million in flash sales site Vipshop Holdings, a major tie-up between China’s most powerful social network and two of its important e-commerce players.
Tencent and JD.com will subscribe for newly issued Class A ordinary shares of Vipshop in the amount of approximately $604 million and approximately $259 million, respectively, resulting in ownership of 7 percent and 5.5 percent of Vipshop’s total issued shares.
The purchase price will be $65.40 per Class A ordinary share, equivalent to $13.08 per American Depositary Share, of Vipshop, a 55 percent premium over the closing price of the ADS on Dec. 15.
“I am truly delighted about Vipshop’s new strategic cooperation relationships with Tencent and JD.com,” said Eric Ya Shen, Vipshop’s cofounder, chairman and chief executive officer. “This undoubtedly is an important event for Vipshop as well as China’s e-commerce and internet industries. We, together with Tencent and JD.com, will leverage our respective strengths to form a strategic cooperative alliance aiming to achieve a deep, win-win cooperation and to benefit Internet users and consumers. We will develop a holistic cooperation with Tencent on the Weixin platform [also known as WeChat] and expand our strategic alliance with Tencent into more and broader areas.”
Founded in 2008, Vipshop counts over 60 million active customers and is the largest online discount retailer in China by transaction value, working with over 22,000 brands. In its most recent quarter ended Sep.30, the New York Stock Exchange-listed Vipshop saw net income of $50.8 million on net revenue of $2.3 billion.
The acquisition once again pits JD.com against Alibaba, which owns Mei.com, a similar flash sales site although Vipshop is much bigger. The deal also adds a large number of female users to JD.com whose user base is still skews male–stemming from its origins as an electronics products site.
Pascal Martin, partner at OC&C Strategy Consultants, said the investment rounds out a retail ecosystem for the group. (Tencent is the largest shareholder in JD.com).
“It offers an opportunity to provide various sales channels to brands from the introduction of new products – in in-season boutiques on Topline [JD.com’s new luxury brand platform] or JD.com, or pop-up stores on WeChat, owned by Tencent – to end season clearance sales, then clearance off excess stock on VIP.com,” Martin said.
“We already see substantial demand from our users to discover, discuss and purchase branded apparel in our applications,” Martin Lau, president of Tencent Holdings, added, “and we believe that connecting our users more deeply to products on Vipshop’s platform will enrich their online experiences while benefiting Vipshop.”