Tongcheng Tourism plans demerger and separate IPOs
Tongcheng plans to split its business into two separate entities: a travel agency selling leisure tours and attractions and a network grouping the company’s profitable standardized products in air, accommodation and railway.
Tongcheng Tourism Group (or LY.com) announced on June 17 that the company plans to split its business into two entities. The company will splash out RMB 3 billion to build Tongcheng Travel Agency (Group) to operate vacation tours and attraction tours. Its profitable standardized products such as air tickets, accommodation and railway offerings will be grouped under Tongcheng Network.
“Following the restructuring, we plan to list the entities independently when the time is right,” said Any Wu, founder and CEO of Tongcheng Tourism. It’s the company’s latest move to tap the capital market following the implementation of its “Big Data+People” strategy that aims to drive consolidated online-offline development.
Tongcheng Tourism’s co-founder and president Heping Ma will be president of Tongcheng Network, and Jian Wu, Tongcheng Tourism’s co-founder and co-president, will be appointed president of Tongcheng Travel Agency (Group).
Fast track IPO for high-yield spin-off
Tongcheng Network will operate booking services for standardized products including air tickets, accommodation and railway tickets, as well as Tongcheng Financial and Tongcheng Aviation. This business area is already delivering considerable profitability for the company.
Mr. Ma said that Tongcheng, one of the three largest air ticket distributors in the industry, is handling 100,000 air ticket bookings daily and has posted 250% YoY growth in this stream. “Tongcheng Network will deliver profits in excess of RMB 100 million in 2016,” said Mr. Ma, who also projected that the new company’s total net income for the next three years would reach RMB 1 billion.
“Tongcheng Network will become the second Chinese OTA to reach considerable profitability after Ctrip. The company will continue to pursue an independent IPO and will not rule out means such as reverse merger to enter China’s capital market.” said Mr. Wu. （Translated by Jerry）