Tencent Holdings Limited and JD.com Inc. (NASDAQ: JD) jointly announced on Monday that it will invest $863 million in cash into Vipshop Holdings Limited (NYSE: VIPS), one of China’s leading online discount retailer. Vipshop shares were up over 40 percent on Monday.
Under the agreement, Tencent and JD.com will subscribe for a newly issued Class A ordinary shares of Vipshop at approximately $604 million and approximately $259 million, respectively. The price per share will be valued at $13.08, a 55 percent premium over December 15 closing price.
Tencent and JD.com will hold approximately 7 percent and 5.5 percent, respectively, or Vipshop’s shares. After the end of the lockup, Tencent and JD.com will hold 12 percent and 8 percent, respectively.
Vipshop is a leading online discount retailer in China. The joined strategic plan is to battle against China’s major eCommerce retailer, Alibaba. The investment into Vipshop allows Tencent and JD.com to expand its business focus, competing against Alibaba.
Tencent owns WeChat, which has over one billion users. The investment into Vipshop can reach a large audience, specifically the Asian demographic.
"This undoubtedly is an important event for Vipshop as well as China's e-commerce and internet industries,” said Eric Ya Shen, Vipshop's Co-founder, Chairman of the Board of Directors and Chief Executive Officer, “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 already see substantial demand from our users to discover, discuss and purchase branded apparel in our applications, and we believe that connecting our users more deeply to products on Vipshop's platform will enrich their online experiences while benefiting Vipshop,” said Martin Lau, President of Tencent.
“Right now in the Chinese market we have two internet powers,” said Weiwen Han, managing partner for Greater China at Bain & Company. “Investments will either fall into the Alibaba or Tencent camp.”