Reportedly, China's largest search engine,
) Qunar unit will merge with
Ctrip.com International Ltd.
) to expand its travel search market. Shares of Ctrip surged
10.4% in after-hours trading.
Baidu's ownership in Qunar Cayman Islands Limited (
) - a travel website - came through the acquisition of a majority
stake (55%) in the company for $306 million in cash.
The proposed merger could be a complete acquisition, a
partnership or just a small ownership in Ctrip.com, according to
sources. Information regarding the ownership structure, financing
methods and other details has been kept confidential.
Shanghai-based Ctrip.com was founded in 1999 by James Liang,
Neil Shen, Min Fan and Ji Qi. It provides travel services for
hotel accommodations, packaged tours and corporate travel
Travel contributes a major share of Baidu's advertising
revenues. Therefore, if this deal goes through, Baidu's traffic
volume would increase considerably and consequently generate
higher advertising revenues. According to iResearch, Ctrip had a
47.3% share of the Chinese online travel market in 2012.Thus, the
deal will also help Baidu better compete with Alibaba Group
Holding Ltd. and Tencent Holdings Ltd.
Travel search is gradually becoming one of the fastest-growing
segments of the online travel industry. As per iResearch, China's
online travel market is expected to reach 465 billion yuan ($75
billion) by 2017 driven by increased spending of the middle class
on leisure and entertainment.
Therefore, to increase its presence in online travel, video
and e-Commerce market, Baidu has acquired a number of companies
in the recent quarters. Last year in May, Baidu acquired the
online video business of the Shanghai-based PPS for $370 million
to become China's largest online video platform by the number of
mobile users and video viewing time. In July, the company bought
a leading mobile applications platform, 91 Wireless Websoft for
$1.9 billion, the biggest acquisition in the market last year.
The company has made many more acquisitions, including Nuomi and
Beijing Huanxiang Zongheng, the online literature business of
gaming company - Perfect World.
Despite benefiting Baidu in the long run and helping it to
remain competitive, these investments will have an impact on near
term earnings. In the last concluded quarter, the company's
earnings of $1.29 per share missed the Zacks Consensus Estimate
of $1.38 due to increased investments. These investments are
likely to remain an overhang on earnings and margins in the near
Baidu provides Internet search services in Chinese. It also
offers a Chinese language search platform for businesses to reach
their customers. Following the news, the shares surged 5.19% in
Currently, Baidu has a Zacks Rank #5 (Strong Sell). A
better-ranked stock that offers an attractive investment option
this season is
), carrying a Zacks Rank #2 (Buy).
BAIDU INC (BIDU): Free Stock Analysis Report
CTRIP.COM INTL (CTRP): Free Stock Analysis
FACEBOOK INC-A (FB): Free Stock Analysis
QUNAR CAYMN LTD (QUNR): Free Stock Analysis
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