Tencent Plans To Sell Meituan Stake Worth $24-B

China's Tencent Holdings plans to sell all or a bulk of its $24 billion stake in food delivery firm Meituan to placate domestic regulators and monetize an eight-year-old investment, four sources with knowledge of the matter said, Julie Zhu and Kane Wu reported for Reuters.

Photo Insert: Based on Meituan's market capitalization as of Monday, Tencent's 17% stake is worth $24.3 billion.

Tencent, which owns 17% of Meituan, has been engaging with financial advisers in recent months to work out how to execute a potentially large sale of its Meituan stake, said three of the sources.

The planned sale comes against the backdrop of China's sweeping regulatory crackdown since late 2020 on technology heavyweights that took aim at their empire building via stake acquisitions and domestic concentration of market power.

That crackdown, which has led to billions of dollars in fines for the Chinese tech giants, is reshaping the companies by forcing them to make multi-billion dollar divestments.

Tencent, for instance, is exiting a clutch of businesses now and pivoting towards the global gaming market.

The owner of China's No. 1 messaging app WeChat first invested in Meituan's rival Dianping in 2014, which then merged with Meituan a year later to form the current company.

Based on Meituan's market capitalization as of Monday, Tencent's 17% stake is worth $24.3 billion. Tencent is seeking to kick off the sale within this year if market conditions are favourable, said two of the sources.

It has been reducing holdings in portfolio companies partly to appease the Chinese regulators and partly to book hefty profits on those bets, said three of the sources.

The value of its shareholdings in listed companies excluding its subsidiaries dropped to just $89 billion as of end-March from $201 billion in the same period last year, according to its quarterly reports.

"The regulators are apparently not happy that tech giants like Tencent have invested in and even become a big backer of various tech firms that run businesses closely related to people's livelihoods in the country," said one of the sources.

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