As at the end of 2009, Tencent has cash and cash equivalents of about 11.6953 billion yuan RMB, but the road expansion in M & A, Tencent still seemed "timid."
Until April 12, the day night with Russian Internet company Tencent Digital Sky Technologies Limited (hereinafter referred to as "DST") jointly announced that Tencent will invest about 300 million U.S. dollars DST, the two companies will establish a long-term strategic partnership.
Newspaper reporter learned that about 3 million total investment will be fully paid in cash. After completion of the transaction, DST Tencent will hold approximately 10.26% of the economic rights and DST about 0.51% of the total voting rights and the right to nominate a board observer DST.
This is the largest to date Tencent Foreign M & A is also true of its international strategy Beginning of move. But in reality the other side, compared to traditional industries, with strong regional culture of the Internet industry, its international road has always been struggling.
Prior to the June 5, 2009, in Shenzhen FIYTA building - former headquarters of Tencent, Tencent Mr. Ma on the reporter asked why the development of very few mergers and acquisitions said, "We also want to ah (to do M & A), but Can not find appropriate. "
Day of Tencent Holdings (00700.HK) Hong Kong dollar to close at 91.15. At present the company's share price has reached a high of 175 Hong Kong dollars, second only to Google, Amazon, the world's third Internet company market capitalization.
Integrated business model advantages
Tencent shares, if not the DST, the China Internet industry to the Russian Internet market, deep knowledge, few. Even in the Tencent company, most of the staff for the DST and the limited knowledge of the Russian market.
But Russian Internet market, DST has played an important role. DST was founded in 2005, is a leader in the Russian and Western financial institutions backed private company, is also Russian and Eastern European market is the most influential Internet companies. DST brand covers a large proportion of Russian market, page views, more than 300 million people of potential users.
DST owns Mail.ru and other highly popular portal and social networking sites Forticom Group. In addition, holders of Facebook, and Zynga and other global Internet companies shares.
"This investment will enable us to benefit from the fast-growing Internet market in Russia." Tencent's president, said Liu Zhi Ping. The Senior Manager of Investor Relations Tencent Guo Ye Zhen reporter's written interview, said: "We believe that Russian market, Internet and broadband penetration is relatively low, a great growth potential."
Data from comScore show that the number of Russian Internet users from 2008 to 1749 million, an increase of about 4,500 people so far, the fastest growth of Internet users in Europe countries.
"Tencent in China on the successful business model, DST will effectively help enhance profitability in the Russian market." JP Morgan Internet analyst Dick Wei in an interview to this reporter's analysis, in particular, value-added services in the community, Tencent in explore the Chinese market in the world is a leader in social networking sites.
Tencent 2009 Fourth-quarter results, value-added services to chain community category increased 18.1% to 1.2921 billion yuan, accounting for about one-third of total revenue during the period Tencent.
"In the future Tencent may be advantages in the Chinese market business model, exploring the effective integration of the Russian domestic market." Dick Wei analysis, such as value-added services in the community mode of grafting, and even instant messaging in the field of cross-border interoperability in areas such as have greater business integration space.
"Stake in DST through the line to enter the Russian market Tencent's long-term strategy, with strong local companies and cooperation to explore and seize the market potential, our future will continue to explore this strategic business development opportunities." Ip Kwok Ching said.
Tencent's acquisition logic
In fact, M & A expansion is Tencent recent years, the internal one of the most discussed topics.
Since 2007, Tencent into the period of rapid growth - Revenue growth for three consecutive years over 70%. In 2009, the annual net profit of 5.1556 billion yuan Tencent (755.1 million U.S. dollars), up 85.2%, once again become "the most profitable Internet company."
"Quite a long time in the future, Tencent performance still be growing, but not always maintain such a high rate of increase." Many insiders Tencent exchange with reporters admitted.
Analysys International CEO in Jan when interviewed after that, Tencent completed in almost all Internet distribution business, the "introduction of the past rely on business sector rotation to improve the performance of the model will come to an end, the next point where the profit ? should be the Tencent's strategy for the future. "
In this context, M & A expansion will undoubtedly become Tencent improve performance and stimulate share price, "涓?鍙岄洉" move. However, during the development, Tencent treatment of mergers and acquisitions are more cautious then.
"In instant messaging, social networking sites and other fields, Tencent an independent, leading to the acquisition of a larger gap between the two sides is often very difficult to reach agreement. And in the search engines, e-commerce Tencent weaker areas, there has been some domestic market oligopoly enterprise, it is difficult to find suitable acquisition target. "Tencent an insider analysis, relying Tencent QQ's user base has an extremely viscous, Tencent independent development of new business success rate is relatively high:" This is the objective, but also to the lack of M & QQ the need for expansion. "
But this is not Tencent "prudent acquisitions," the whole story.
"We do not want to do is not the acquisition, but not easy to find the right company." Tencent had a high level when interviewed said, Tencent also visit some enterprises: "We have seen too many companies have some results, far too exaggerated, the high asking price, think very far. We do not want to do that. "
Prior to an interview Mr. Ma also said frankly: "(For M & A) You can only pick really good, or is easier to integrate incoming businesses. This right is not always easy to find businesses."
The 300 million dollar stake in DST behind them and flashed the Tencent's instant messaging service core of the grand cross-border expansion. Reporter noted that Tencent's largest shareholder HIM China, Mail.ru in DST shareholders holding more than 30% enjoyed the right to vote.
Mail.ru is Russia's market share in the second instant messaging companies, about 34% market share, second only to the ICQ number one market share of about 51%.
Prior to market rumors, ICQ in the three final bidders, that there is DST, and Tencent. If DST M & ICQ trip, it will take Russia instant messaging market share of over 80%. Dick Wei analysis: "Tencent not rule out participation by DST bid on ICQ."
Journey abroad of China's Internet
Although Tencent is China's largest Internet company, but the journey overseas, Tencent not be considered a forerunner in the industry.
Back in July 2006, Baidu to enter Japan on a high profile; in March 2007, Baidu formally launched beta version of Japan; in January 2008, Baidu formally branch operations in Japan, entered a substantive step into the Japanese market .
But now, Baidu search engine market in Japan, the expansion is still limited. ComScore data show that in February of this year, 91% of Japan's search market share to Google and Yahoo both occupied.
"The Internet will be through the establishment of overseas branches in the form of direct access to overseas markets business, will face geographical and cultural barriers, so the low probability of success." Analysys International CEO in Jan that, compared to select the localization partners, through cooperation in the form of shares of overseas expansion, it appears relatively safe.
Tencent has also echoed the same view, one of the company's long-term strategy is "Through strategic investments and partnerships in emerging markets with the best local Internet companies to cooperate."
In fact, overseas markets, is not the first time in Tencent. June 2008, Tencent, MIH India on the global network through the company (MIH India Global Internet) cooperation, into the Indian market, Tencent holdings up to 50% minus 1 share - not seek Tencent Holdings. Under the agreement, Tencent will next three years, global investment 7.5 million U.S. dollars in India to provide, including instant messaging and e-commerce, including technical support.
"From the design options, short term, Tencent is more of a financial investor." Dick Wei Analysis: "DST shares within one to two years on the Russian market should Tencent awareness and run-in period, at the operational level of integration should not be very fast. "
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