China’s internet giants, Tencent Holdings Ltd and JD.com Inc has announced a joint investment of around US$863 million in Vipshop, a leading online discount retailer for brands in China. The move may be seen as a strategic move to counter Alibaba Group in the country.
Pursuant to the share subscription agreement, Tencent and JD.com will subscribe for newly issued Class A ordinary shares of Vipshop in the amount of approximately US$604 million and approximately US$259 million, respectively.
The purchase price will be US$65.40 per Class A ordinary share, which is equivalent to US$13.08 per American Depositary Share (“ADS”) of Vipshop, five of which represent one Class A ordinary share.
The transaction is expected to close in the near future, subject to customary closing conditions. Upon the closing, Tencent and JD.com will beneficially own, taking into account any existing holding, approximately 7% and 5.5%, respectively, of Vipshop’s total issued shares.
The Class A ordinary shares issued to Tencent and JD.com will be subject to a two-year lock up restriction. Tencent and JD.com will have the right to appoint a director and an observer, respectively, to Vipshop’s board of directors during the two-year lockup period.
After the end of the lock-up period, for so long as Tencent and JD.com hold approximately 12% and 8%, respectively, of Vipshop’s total issued shares, or otherwise by mutual agreement with Vipshop, they will maintain director and board observer rights.
“I am truly delighted about Vipshop’s new strategic cooperation relationships with Tencent and JD.com,” said Eric Ya Shen, Vipshop’s Co-founder, Chairman of the Board of Directors and Chief Executive Officer.
Martin Lau, President of Tencent Holdings, said, “We are pleased to become strategic investor in and partner with Vipshop. We look forward to providing Vipshop with our audiences, marketing solutions, and payment support to help the company provide branded apparel and other product categories to China’s rising middle class.”