China’s top OTA Ctrip, announced it proposes to offer up to US$1 billion in aggregate principal amount of senior notes convertible into Ctrip's ADS, each representing 0.25 of an ordinary share.
Ctrip intends to use a portion of the net proceeds of the offering to fund call spread transactions with one or more third party financial institutions. It will then use the remaining net proceeds for other general corporate purposes, including a concurrent repurchase of its ADSs and potential note retirement or other securities transactions.
Ctrip has kept its leading position through strategic investments and acquisitions, in 2014 alone it invested in fourteen companies, with a total investment of approximately US$674 million.
Investments included a RMB1.4 billion equity acquisition of rival OTA LY.com in April 2014 and a US$75 million investment in Tujia, bringing total investment in the vacation property rental startup to US$126.3, in June 2014.
In a deal that culminated in January this year, Ctrip purchased a majority stake in London-based Travelfusion, an aggregator site for low-cost carriers and hotels, for a reported $160 million.
Last month Ctrip received an additional $250 million investment form Priceline Group that follows a $500 million investment in August 2014. Following issuance and conversion of the two bonds, The Priceline Group will own securities representing approximately 10.5% of Ctrip's outstanding shares.
Ctrip also invested with car rental and services provider, with US$101 million in Yongche and US$86 million eHi and has minority stakes in hotel operators, China Lodging Group Ltd.,
In May Ctrip’s archrival Qunar snubbed its acquisition offer while receiving a $500 million strategic investment from Silver Lake and other investors, in the form of a 2% convertible notes with a conversion price of $55 to financing its aggressive sales and marketing campaign. It also got an 8 million ADS secondary offering netting it around $400 million more.
Also in May upstart OTA Tuniu sold $500 million worth of new shares to a group of investors led by JD.com, China's No. 2 e-commerce site. It has entered into an in-depth strategic agreement with JD.com to gain the exclusive rights to operate the leisure travel channel on JD.com and a wide range of operational support, including its big data, financial services, traffic and operating resources.
As the outbound market continues to pick up speed, China’s hyper-competitive OTA market is heating up again and the major players are busy raising funds in preparation for the epic battle ahead. Will Ctrip be strong enough to fend off Qunar’s aggressive price war strategy or will up and coming competitors like Tuniu cut into Ctrip’s market share and erode it dominance? Whatever the outcome, China’s travel industry is sure to be active in the months ahead.(Transaltion by David)