Chuan Cheng will be the replacement of stock options, the acquisition of Art Dragon 65% Equity

Absrtact: A few days ago there has been news that Ctrip will replace the way to buy art Dragon 65% equity. On the morning of July 8, Expedia, a foreign online travel company that is the biggest shareholder of the Art Dragon, said the media reported that the company would sell a majority stake in the Art Dragon Company.

The previous few days have been news that Ctrip will be the way to replace the shares, the acquisition of Art Dragon 65% equity.

On the morning of July 8, Expedia, a foreign online travel company that is the biggest shareholder of the Art Dragon, said rumors that the company would sell a majority stake in the art dragon were untrue, and that the company remained a longtime investor in the Art Dragon and would support the art Dragon as China's leading tourist site. 2005, Expedia's parent company Iac/interactivecorp. acquired the controlling power of the art Dragon. Expedia currently owns about 65% of the art Dragon.

Who's Expedia? Domestic users may not understand, I would like to make a brief introduction: Expedia and Ctrip Similar, the main business is online travel products booking, relying on "agent + wholesaler" mode to sell products of tourism products suppliers and get commissions. Expedia has a number of subsidiaries, including the current market value of $15.3 billion trillion, the world's largest tourist community TripAdvisor, to 632 million of dollars in the price of the acquisition of the popular hotels in Europe, such as the search site Trivago.

Again to see Ctrip, 2014 can be called Ctrip investment year, the first half, Ctrip holdings such as home, China, 7 days three economic hotels, hotel customer monitoring and management systems company, Easy road with cars, a hi rental, Cicada travels. Not only that, in the line tourism market Ctrip is busy "happy enclosure", the beginning of this year, Ctrip Strategic investment travel wind; April 10, Ctrip to 220 million U.S. dollars to invest in the same process, accounting for about 30% of the shares become the second largest shareholder. April 27, Ctrip and passers-by reached an agreement, will be in transit cattle IPO completed by the price of a 15 million-dollar stake in the purchase of cattle.

Comprehensive on all kinds, but also add Ctrip to buy more imagination space and storytelling room. Why is Ctrip so suddenly so happy to rodeo? Why is Expedia willing to sell a stake in the art Dragon? Is this really just a merger case? According to what I've been looking for in the last few days, the insider doesn't seem to be as simple as it seems.

The surplus value of the art Dragon

In 2007, art Dragon new handsome Cui soon took office, for the Arts Dragon has identified a new growth strategy: "Focus on hotel reservations", so at the expense of reducing the product line, cut off the holiday and travel services. It now appears that this strategy provides the support for the growth of the art dragon in the next five years, but at the same time, it also buries a long-term curse.

Focus on the hotel business, so that the arts dragon can concentrate resources from competitors to compete for share. After painstaking, to 2012 years, its market value from the original Ctrip 1/14 soared to 1/5. But with Ctrip on the internal business Framework, management structure of the reform, as well as the United States Group Group purchase site to kill into the hotel industry. From the second half of the 2012, the development of art Dragon encountered a bottleneck, from then on, accompanied by the tragic price war, the art of the decline of the road more and more deep.

Following the net loss of 167 million yuan in 2013, the Arts Dragon continued to lose 35.4 million yuan in the first quarter of 2014. As profits are gradually diluted and core business advantages lost, the future of the art dragon seems increasingly difficult to make people optimistic.

The failure of the "old club" Expedia, the Art Dragon's online tourism market, is not only likely to be a drain on Expedia's huge investment, but also likely to squeeze Expedia out of the Chinese market.

Therefore, how to use the "surplus value" of the art Dragon becomes a key step in the Expedia chess game, no more than a lifeline.

At present, the domestic online tourism field of several major players, in addition to Ctrip, Art Dragon, is where to go. As the second largest investor for the art of Tencent, and where to the parent company for Baidu, its integration is not very small. And where to go. Management is currently not interested in the "swap" cooperation, and Expedia has pinned its hopes on Ctrip.

Although the complementarity is very low, but Ctrip's interest in this cooperation is that it can completely eradicate where to work with the arts dragon possible to eliminate the greatest potential threat. And for the most happy to see the Expedia, it will be able to swap the way to hold Ctrip, curve for their "Chinese Dream" alternative.

Denial of trade or evasion of antitrust scrutiny

Mergers and acquisitions are too normal, and this powerful combination for both sides of the stock price must also be a good, Ctrip and art dragon why so evasive? Did he end up talking or did he think otherwise?

"As the first and second top of the domestic online hotel reservation market, the ' art-carrying ' merger has a potential monopoly problem, and mofcom may initiate an antitrust investigation," he said. Yang Yanfeng, associate researcher at China Tourism Research Institute.

From this point of view, it is not difficult for us to understand why Expedia is eager to "clarify the facts", and insiders may not want to "spook" at the most crucial moment of negotiations.

Recently, a senior industry personage revealed that, by Expedia, Art Dragon will deliberately make a small income in the future, weaken their share and influence in the domestic online hotel area, so as to circumvent the domestic anti-monopoly Authority's review.

After this, the Arts Dragon will choose to return to the city, and based on the above series of arrangements, Ctrip will be able to successfully borrow small shares of investment in the way Low-cost and Yi-long swap shares. The next thing is that Ctrip and Expedia signed an agreement to share the art Dragon's income, and in return, Expedia will hold Ctrip through a swap.

The complexity of capital operations may sound obscure, but it is not groundless to be able to describe the details in such a specific way.

Expedia's bigger ambitions

However, Expedia's ambitions may be more than that. Refer to the data, Ctrip's institutional shareholders, including the Oppenheimer Fund, holding 4.63 million shares accounted for 13.72%,t.roweprice holding 4.4 million 13.13%,bailliegifford holding 1.82 million shares accounted for 5.41%. Ctrip after the acquisition of Art Dragon, Expedia in the new company will become a major shareholder, or even more than the largest shareholder Oppenheimer fund.

Industry insiders point out that the ultimate goal of Expedia, worth as much as $10.673 billion trillion, is for Chinese companies to use their overseas inventories. To better achieve this goal, Expedia will largely intend to "privatize" the buy-out firms.

"Privatization" of listed companies is a special kind of merger and acquisition operation in capital market. In layman's terms, it is the controlling shareholder who buys all the shares in the hands of the minority shareholders and expands their share, eventually bringing the company back to market. This is not beneficial to the Ctrip management, led by Liang Jianzhang, who still wants to be a part of the domestic online tourism market.

From this point of view, Ctrip now faces a dilemma: either continue to bear to develop alone, or dare to swallow the art dragon this poison pill. Either way, it doesn't feel good. Don't forget, Expedia is not a vegetarian. As to the outcome, we will wait and see.