For each of the big three Chinese Internet companies (Tencent, Alibaba, Baidu), there is at least one technology provider that would fill a need. Qihoo 360 Technology Co., with a market value of $13.2 billion, might appeal to Chinese e-commerce leader Alibaba because of its anti-virus software, said Guotai Junan International Holdings Ltd. Travel site Ctrip.com International Ltd. may lure Tencent, according to Riedel Research Group Inc., while classifieds website operator 58.com Inc. could attract China’s largest search engine Baidu, Pacific Crest Securities said.
“It’s going to be a pretty hot M&A space for the next couple of years and that’s really just driven by competition between the three largest players,” Cheng Cheng, a Portland, Oregon-based analyst at Pacific Crest, said in a phone interview.
Deal Motivation
Tencent’s strength hasn’t been in online shopping or advertising so one option for the $141 billion company may be a tie-up, or an equity swap, with Suning Commerce Group Co., China’s largest electronics retailer, according to Wang at IResearch.
“Tencent has a lot of traffic but it lacks methods to monetize its business,” said Wang. “There is a real motivation for Tencent to invest in or acquire e-commerce companies." Another possibility for Tencent could be to acquire an online travel service such as Ctrip.
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