Ctrip and Qunar and merge with Baidu-Ctrip share exchange

Update: 2015-10-29

The dust has finally settled on China’s online travel industry’s greatest rivalries as Ctrip and Qunar merge with the help of search engine giant Baidu.

The epic Ctrip-Qunar merger came about when Qunar’s largest shareholder Baidu exchanged Qunar shares with Ctrip for the latter’s shares. In its press release Ctrip said: “Shanghai, Oct. 26, 2015 - Ctrip.com today announced that it has completed a share exchange transaction with Baidu for 178,702,519 Class A ordinary shares and 11,450,000 Class B ordinary shares of Qunar owned by Baidu in exchange for 11,488,381 newly-issued ordinary shares of Ctrip. The share exchange ratio for the transaction is 0.725 Ctrip ADSs per Qunar ADS. Baidu will now own ordinary shares of Ctrip representing approximately 25% of Ctrip's aggregate voting interest, and Ctrip will own ordinary shares of Qunar representing approximately 45% of Qunar's aggregate voting interest‎."

With the transaction four Ctrip representatives, including CEO James Liang and COO Jane Sun have been appointed to Qunar's board of directors, as well as Baidu’s CEO Robin Li and VP Tony Yip.

Ctrip is effectively killing two birds with one stone with the merger by not only incorporating its biggest rival Qunar but by also forming a powerful partnership with Baidu. In its press release Ctrip said: Baidu and Ctrip have also agreed to a business cooperation across a broad base of products and services. Baidu expects to continue its existing business cooperation with Qunar.”

Baidu and Ctrip have also agreed to a business cooperation across a broad base of products and services. Baidu expects to continue its existing business cooperation with Qunar.

Baidu’s CEO Robin Li said: "I am happy to announce this transaction, which creates value for our shareholders and demonstrates Baidu's continuing commitment to online travel, an industry with tremendous potential ahead. We are happy with Qunar's accomplishments, and we look forward to working with the leading players in the industry."

Ctrip’s CEO James Liang said: "We are excited by this transaction, which we believe will help build a healthy travel ecosystem in China," said, chairman of the board and chief executive officer of Ctrip. This milestone transaction will enable us to focus on providing the best travel products and services to our travelers. We believe this will create greater value to our customers, partners and shareholders in the future."

Of course this confirms the view of some observers that everything in China belongs to the all-powerful IT triumvirate Baidu, Alibaba and Tencent.

News of the merger boosted Qunar’s share price up 19 points on Monday and it had over 26% in pre-market gains while Ctrip’s shares also had 14% pre-market gains.

Qunar’s CEO CC Zhuang said: "China’s travel industry has great potential and as the leading technology player in the industry, Qunar has become China's fourth largest e-commerce company with tremendous growth momentum. We are very proud of our team, and appreciate the support from our global shareholder base."

However Mr. Zhuang may soon find himself clearing his desk if the fate of former eLong CEO Guangfu Cui, who was replaced after eLong was acquired by Ctrip, can serve as a reliable indication of what lies ahead. Mr. Zhuang will likely become an investor if he leaves Qunar.

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