Baidu Inc (ADR) (NASDAQ:BIDU) Offloads Stake In Qunar (QUNR) To Ctrip (CTRP)

Baidu Inc (ADR) (NASDAQ:BIDU) is selling its 45% stake in online travel company Qunar Cayman Islands Ltd (NASDAQ:QUNR) to International, Ltd. (ADR) (NASDAQ:CTRP), another online travel company. As part of the deal, Baidu will be taking up 25% stake in Ctrip. Qunar had previously rejected a direct buyout bid from Ctrip.

Baidu Inc (ADR) (NASDAQ:BIDU) has agreed to swap its stake in Qunar for a stake in Ctrip. As such, the Chinese Internet search company will transfer its 45% ownership in Qunar to Ctrip and as a result gain 25% ownership in Ctrip. The transaction comes at a time of realignment in China’s competitive online travel industry.

36% premium for BIDU

For every one share of Qunar that Baidu Inc (ADR) (NASDAQ:BIDU) owns, it will receive 0.725 shares of Ctrip. As such, given last week’s closing prices for Qunar and Ctrip, the transaction comes as a nearly 36% premium for Baidu.

The deal between Baidu Inc (ADR) (NASDAQ:BIDU) and Ctrip about the stake in Qunar is expected to be a win for multiple online travel companies with footprints in China. As for Baidu, the transaction earns it a 36% premium and also exposes it to one of China’s largest online travel agencies – Ctrip. As for Ctrip, the transaction allows it to consolidate its base in China, a market that is both promising and challenging.

China’s travel market

It is estimated that outbound travelers in China were 61.9 million in 1H2015, indicating an increase of 12% from the same period last year. By 2030, Boston Consulting Group believes that Chinese tourists will spend nearly $1.8 trillion on travel/tourism.

Expedia Inc (NASDAQ:EXPE) and Priceline Group Inc (NASDAQ:PCLN) are also cited among the winners in the transaction between Baidu Inc (ADR) (NASDAQ:BIDU) and Ctrip. Part of the reason is that Expedia and Priceline each have a partnership with Ctrip.

Ctrip on Qunar’s board

Ctrip’s CEO, James Liang and COO, Jane Sun, will join the board of Qunar after the transaction is closed.

In 2Q, Ctrip’s net income rose 5.8% YoY to 142.8 million yuan (about $22.5 million). On its part, Qunar posted a loss of 815.7 million yuan in 2Q, which was almost double the loss in the same period a year earlier.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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