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How the Meituan–Dianping Investment Could Help Priceline

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Investment

On October 19, Priceline (PCLN) announced its $450.0 million investment in China-based Meituan–Dianping. Priceline’s investment is a part of a $4.0 billion investment round for Meituan–Dianping.

Tencent, which is already an investor in the group, was a lead investor in the round. Other investors included:

  • IDG Capital
  • Sequoia Capital
  • Canada Pension Plan Investment Board
  • GIC
  • Trustbridge Partners
  • Tiger Global Management
  • Coatue Management
  • Alibaba (BABA)

About Meituan–Dianping

Meituan–Dianping was formed in 2010 following the merger by Meituan, which was a food delivery and group buying app, and Dianping, a restaurant review app similar to Yelp (YELP).

Meituan–Dianping allows users to buy goods and services from local merchants, and it has a current customer base of 260 million.

How does Priceline benefit?

Meituan–Dianping has four business segments: In-Store Dining, Lifestyle & Entertainment, On-Demand Delivery, and Travel & Leisure. Priceline is interested only in the Travel & Leisure segment.

According to the filing, Priceline’s Singapore-based Agoda.com would enter into a commercial relationship with Meituan–Dianping. Agoda currently provides online travel services in Asia.

This arrangement could be similar to Ctrip’s (CTRP) deal with Booking.com. All of Ctrip’s non-China inventory comes from Booking.com and vice versa.

Adding Meituan–Dianping’s inventory to Agoda could be a significant step forward for Agoda, which currently has only 200,000 foreign hotels listed on its platform.

The deal confirms Priceline’s focus on the Chinese market. This deal also marks a key first step for Priceline’s CEO, Glenn Fogel, who joined Priceline at the beginning of 2017. The deal seems like a good strategic move on Priceline’s part by not solely relying on Ctrip for its China growth initiative.

Investors can gain exposure to Priceline stock by investing in the PowerShares Dynamic Large Cap Growth Portfolio ETF (PWB), which holds ~3.2% of its portfolio in the stock.

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