Ctrip Mega Bond: Qunar Investment Coming?
10/11/2013|11:35:52 AM|seekingalpha.com

Online travel site Ctrip (Nasdaq: CTRP) has just become the latest Chinese Internet company to announce a mega-bond offering, taking advantage of its market-leading status to raise up to $500 million. While the bond itself is interesting, the more intriguing matter is what Ctrip plans to do with the funds. The company says that acquisitions is one possibility, leading me to speculate the company could purchase a stake in fast-rising rival Qunar, or even purchase the company outright.

After years of inactivity, major M&A has suddenly heated up this year in China's Internet space, fueled by a small group of cash-rich industry leaders purchasing money-losing smaller firms that have strong prospects but are starved for funds. Leading e-commerce firm Alibaba, top search firm Baidu (Nasdaq: BIDU) and social media leader Tencent (HKEx: 700, [[TCEHY.PK,]]) have all made purchases worth hundreds of millions of dollars this year, both inside and outside China. Tencent and Baidu have financed those deals partly with mega bond offerings, and Alibaba has also raised cash by bringing in new investors.

Now Ctrip looks set to enter the M&A rush, with its announcement of this new convertible bond offering. Most of the announcement is technical, and not really worth repeating here. The main buyers appear to be hedge funds, which are betting that Ctrip's shares will continue their recent rally, making the bonds more valuable for eventual conversion to Ctrip shares.

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