The Southwood Group looks at the travel website controlled by Chinese internet giant Baidu Inc, Qunar Cayman Islands Ltd, reportedly discussing a merger with its rival Ctrip.com International Ltd.
Hong Kong, May 2, 2014 - (PressReleasePoint) -
Baidu Inc, one of China’s big three internet companies and owner of country’s most-popular search engine, continues to invest heavily in acquiring services that will see it better able to compete with its rivals and fellow big three members, Alibaba Group Holding Ltd and Tencent Holdings Ltd in the battle for the country’s 618 million internet users. China’s online travel market is expected to grow to $75 billion over the next two years, driven by an expanding middle class that increasingly finds it spending more on leisure and entertainment.
Reports of the possible merger between the two travel companies saw the markets driven up, Baidu ‘s shares 5.2% to close at $150.96 their largest gain in a month, with Qunar Cayman Islands Ltd advancing 15% to $30.84, the companies largest intraday advance since its initial public offering, listed on the first of November and Ctrip gaining 10% to $55.48.
“We must be clear, at the moment this is just an unconfirmed report from sources close to the two companies and while it would seem to make a lot of sense for the merger to go ahead, something the market clearly agrees with, it is by no means even close to being a done deal, leaving aside this development all three companies are very strong investment candidates in their own right,” stated Martin Pearce a research and development strategist at The Southwood Group.
Any potential merger would conceivably reduce some operating costs for Ctrip, as the travel company often engages Qunar services to acquire additional Web traffic to boost its bookings. Uncertainty is also high regarding as to which company would take charge should a merger occur with the Baidu controlled Qunar having a market capitalization of around $3.5 billion, with the online travel service’s shares more than doubling in value since raising $167 million in its IPO last year, while its rival Ctrip is valued at $7.2 billion.
“No matter what happens in regards to this speculated merger, these companies and most Chinese internet concerns are extremely well performing investments at this time, something that no one is suggesting will change anytime soon. As China’s staggering internet user base continues to grow and the revenues from it are increasingly richer, large companies including the big three will continue to benefit at a very enviable rate,” concluded Martin Pearce the research and development strategist at The Southwood Group.
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