BEIJING (Reuters) - Chinese classified advertising site 58.com Inc (N:WUBA) said on Friday that it had agreed to buy a 43.2 percent stake in rival Ganji.com, marking further consolidation in the mainland's hot technology sector.
In February, China's two leading taxi-hailing apps Didi Dache and Kuaidi Dache agreed to merge, creating a $6 billion company.
New York-listed 58.com, dubbed the Craigslist of China and backed by Tencent Holdings Ltd (HK:0700), said it would issue 34 million new ordinary shares and pay $412.2 million in cash to acquire the stake in Ganji.com. At the current market price, the deal is valued at $1.6 billion, according to Reuters calculations.
A person with direct knowledge of the matter however said the acquisition price was about $1.2 billion. 58.com declined to comment on the acquisition value.
58.com is buying the stake from Ganji.com shareholders including private equity firms Tiger Global Management, Carlyle Group (NASDAQ:CG) and CITIC Capital, venture capital firms Sequoia Capital, Nokia Growth Partners and Ganji.com's employees and management, said the person, who was not authorized to speak publicly about the matter.
Boutique investment firm China Renaissance advised the selling shareholders, that person said.
At the same time, social networking firm Tencent will invest about $400 million in 58.com, leaving its stake at roughly 25.1 percent, 58.com said. Both deals are expected to close "within a few days", the advertising site said in a statement on Friday.
Last year, Tencent, China's biggest social networking and online entertainment firm, bought a 20 percent stake in 58.com for $736 million, as part of a drive to boost its e-commerce business.
The deal with Ganji.com is aimed at integrating the two businesses to decrease costs while bolstering revenues, 58.com CEO Michael Yao was quoted as saying in the statement.
The firms will operate their own brands, websites and teams, according to the statement.
"We have seen and continue to see the mobile internet enabling a transformative opportunity in the classified industry," said Ganji.com CEO Mark Yang in the statement.
In a separate letter to employees, the authenticity of which was confirmed by a 58.com spokeswoman, CEO Yao was quoted as saying that the two companies would merge and he and Ganji.com's Yang would be co-chief executives of the new firm.
A Tencent spokeswoman declined to comment on its investment in 58.com. A representative for Ganji.com was not available for immediate comment.