Tencent plans to divest its $24B stake in Meituan

tencent divest 24b meituan stake

China’s Tencent Holdings looks to sell all or bulk of its $24 billion stake in Chinese food delivery firm Meituan to appease domestic regulators and monetize an 8-year-old investment, four sources with knowledge of the matter said.

Tencent owns 17% of Meituan. The firm has been engaging with financial advisers in recent months to work out how to execute a potentially significant sale of its stake in the delivery firm.

The owner of China’s No. 1 messaging app WeChat, tech giant Tencent, first invested in Dianping in 2014. The firm later merged with Meituan a year later to form the current firm.

Based on Meituan’s market capitalization as of 16 August 2022, Tencent’s 17% stake in the firm is worth $24.3 billion.

According to two sources, Tencent is seeking to kick off the sale of its Meituan stake within this year if market conditions are favorable.

The planned sale arrives against widespread regulatory crackdowns in China since late 2020 on tech heavyweights aimed at their empire building via stake acquisitions and domestic concentration of market power.

Tencent has been reducing its stakes partly to appease the regulators in China and partially to book hefty profits on those bets. According to the tech giant’s quarterly reports, the value of its shareholdings in listed firms excluding subsidiaries dropped to only $89 billion as of end-March 2022 from $201 billion in the same period in 2021.