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Mobike, Ofo in talks to merge China's biggest bike-sharing startups

10/09/2017| 11:38:31 AM|

Mobike and Ofo are in early talks to push China’s two largest bike-sharing startups into a merger, aimed at ending a costly competitive battle and creating a single dominant player in the business.

Mobike and Ofo investors are in early talks to push China’s two largest bike-sharing startups into a merger, aimed at ending a costly competitive battle and creating a single dominant player in the fast-growing business, according to people familiar with the matter.

Investors in both companies have been holding talks to sort through issues such as how to split equity as a precursor to getting the companies to the table for negotiations, said the people, asking not to be identified because the matter is private. The pair’s combined valuation would likely exceed USD 4 billion. The discussions are in a preliminary stage, and may not be consummated, they said.

The companies are separately backed by China’s two biggest internet giants -- Alibaba Group Holding Ltd. and Tencent Holdings Ltd. -- which have a track record of investing in competing startups and then combining them as a leader emerges to save money. Unlike in ride-hailing for cars however, China’s bike-sharing startups are the global pioneers and are plotting expansions abroad. A truce at home would give them more resources to gain ground in the U.S., Europe and other parts of Asia.

In June, Tencent, Sequoia Capital, TPG and Hillhouse backed a USD 600 million funding round for Mobike and its fleet of orange bicycles. The next month, Ofo, with its canary yellow two-wheelers, raised more than USD 700 million from investors including Alibaba, Hony Capital and Citic Private Equity.

Mobike is valued at USD 3 billion, while Ofo is USD 1 billion, according to researcher CB Insights. Ofo was seeking funding in June at a USD 3 billion valuation. The companies have forced some smaller operators out of business. Ofo has said it plans to have 20 million bikes in 20 countries by the end of the year.

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TAGS: Mobike | Ofo | bike-sharing
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