Author: Thomas Crown

Baidu has turned to the financial industry to bolster its consumer finance business. The Chinese search giant confirmed that it has sold a majority share in its Financial Services Group (FSG) business to a consortium of private equity firms in a deal worth $1.9 billion.

The business is in the consumer finance space and its services include credit and wealth management. Its competition, beyond traditional financial businesses, includes digital efforts from the likes of Tencent and Alibaba.

The deal — which had been speculated at the end of last year — sees FSG renamed to Du Xiaoman. The group of investors is led by TPG and The Carlyle Group, and it will pay around $1.06 billion for a majority stake. A further $840 million will be given to Du Xiaoman.

Following the transaction, Baidu will own 42 percent of the business, which will operate independently. Guang Zhu, who had been Baidu senior VP and GM of FSG, will become Du Xiaoman CEO.

It’s fairly common for China’s tech giants to incubate business which, when ready, are they spun out to raise capital from segment-specific investors. Indeed, JD.com — Tencent’s e-commerce partner — brought in a range of investors when it granted its financial services division independence via a spin-out two years ago.

Alibaba itself has long-courted investors for Ant Financial, its affiliate division that runs its Alipay mobile money business, its digital banking arm and other financial services. Ant was valued at $60 billion when it raised over $3 billion in 2016 and now the business — which is reportedly closing in on an IPO — is said to be raising as much as $10 billion more at a valuation that could hit $100 billion.

Outside of finance, Baidu’s iQiyi video streaming unit operates independently of the business in a similar model to Du Xiaoman. iQiyi raised over $1.5 billion from a clutch of private equity firms in 2017, before going on to list on the Nasdaq this past March. That’s very much the blueprint in this strategy.

“This transaction marks another milestone for Baidu to incubate new businesses with large opportunities and strong synergies with Baidu’s core business, on the heels of iQiyi’s public listing,” Robin Li, Chairman and CEO of Baidu, added in a statement.

But Baidu has also offloaded businesses that it deemed to be fringe. In food delivery for example, a space where it was out-manoeuvered by the competition, it sold its Waimai business to Ele.me, and then later sold its Ele.me shares to Alibaba when the e-commerce firm moved for a full buyout.

from TechCrunch

Sprint and T-Mobile, after years of going back and forth as to whether they are going to tie up two of the largest telecom providers in the U.S., have announced that the two companies have entered a merger agreement this morning.

The merger will be an all-stock transaction, and will now be subject to regulatory approval. That latter part is going to be its biggest challenge, because it will not only tie up the No. 3 and No. 4 carriers into the U.S. into a single unit, but also that international organizations hold significant stakes in both companies. Softbank controls a majority of Spring, while Deutsche Telekom controls a significant chunk of T-Mobile. Following the administration’s intervention in the Broadcom-Qualcomm takeover attempt, it isn’t clear what will actually go through in terms of major mergers these days.

Bloomberg is reporting that Deutsche Telekom will have 42% ownership of the combined company, while SoftBan will own around 27% of the company.

As expected, the argument here is for the expansion of 5G networks as plans for that start to ramp up. T-Mobile argues in its announcement that it will help it be competitive with AT&T and Verizon as telecom companies start to roll out a next-generation 5G network, though it does in the end remove a carrier choice for end consumers in the U.S..

“The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G,” T-Mobile said in a statement as part of the announcement. “The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.”

Both companies appeared to be finalizing the deal on Friday, when they set valuation terms and were preparing to announce the merger today. The deal values Sprint at an enterprise value of around $59 billion, with the combined company having an enterprise value of $146 billion. AT&T has a market cap of around $214 billion, while Verizon has a market cap of around $213 billion, as of Sunday.

The transaction, the companies said, is of course subject to regulatory approval. But, pending approval, it is expected to close “no later than the first half of 2019.”

Disclosure: Verizon is the parent company of Oath, which owns TechCrunch.

from TechCrunch