Chinese delivery giant Meituan raises $ 10 billion

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A Meituan autonomous delivery vehicle tests at an industrial park in Beijing in November 2020. Photo: cnsphoto

Food delivery giant Meituan has raised $ 10 billion in a sale of equities and convertible bonds, underscoring strong investor confidence in the growth prospects of some Chinese tech companies despite a regulatory crackdown of the sector.

The Tencent-backed company, with a market valuation of $ 220 billion, said it plans to use the proceeds to invest in autonomous delivery vehicles, delivery drones and other cutting-edge technology.

“Meituan will use most of the capital to update its delivery system, which currently relies on human drivers and will soon be unaffordable for the company as labor costs continue to rise in China,” he said. said Zhang Yi, head of consulting firm iiMedia Research.

“He is making plans for his future in five to ten years,” he added.

The autonomous delivery vehicles developed by Meituan were officially put into service in the Shunyi district of Beijing earlier this week.

The vehicles, which have reached autonomous driving level four, can carry up to 150 kilograms and travel up to 20 kilometers per hour.

Over the past five years, these vehicles have undergone 31 tests, including performance, durability, cold environment capability, uptime and the ability to stop when detecting a barrier 150 meters away.

It is estimated that in the next three years, Meituan will offer the autonomous food and vegetable delivery service to Beijing, Shenzhen in Guangdong Province, southern China, and other locations.

Quality of life

“The low-speed autonomous delivery vehicle aims to provide immediate delivery to the outdoors. The release of the vehicle shows that Meituan can mass produce these vehicles. In the future, these unmanned vehicles will be used alongside delivery people to make deliveries more efficient and create a better one.We will also continue to invest more in scientific and technological innovation and accelerate the exploration of distribution without pilot to improve the quality of life for everyone, ”said Xia Huaxia, vice president and chief scientist of Meituan.

Analysts also expect the company to bolster its growing community group wholesale buying service, Meituan Select. The service is part of its new initiatives division, which has reported operating losses and is expected to continue to do so in the coming quarters.

In a record-breaking fundraiser for the company, Meituan sold $ 6.6 billion in shares and earned around $ 3 billion in two-tranche convertible bonds. Another $ 400 million was raised by selling more shares to Tencent Holdings, its largest shareholder, which now stands at around 17 percent.

At least 300 investors have placed orders to buy the stock, with the first 20 orders accounting for around two-thirds of the offer, a knowledgeable source said.

Most of the demand came from long-term global funds, hedge funds and Chinese investors, said the source, who declined to be identified because details of the deal were not public. Meituan declined to comment.

A Meituan food delivery driver is seen in Beijing in February.  Photo: cnsphoto

A Meituan food delivery driver is seen in Beijing in February. Photo: cnsphoto

Funding always available

The strong demand for the company’s debt and equity securities comes as Chinese regulators crack down on tech giants for a range of violations ranging from monopolistic behavior to disregarding customer data handling rules.

These include a record $ 2.8 billion fine this month against Alibaba Group Holding for violations of the monopoly law, while Meituan Select was among five platforms condemned by China last month for inappropriate pricing behavior.

“Chinese regulators … just intend to regulate them according to the law,” Zhang said. “Access to finance, for both giants and start-ups, has not changed and will remain available.”

Tencent recently raised $ 4.2 billion in a bond issue that was the company’s second in a year.

Meituan, which competes with Alibaba-backed Ele.me among others, held about 68.2% of the Chinese food delivery market in the second quarter of 2020, according to Trustdata.

Food delivery to China, which accounts for more than half of Meituan’s total sales, has grown more than five-fold since 2016 to more than 650 billion yuan ($ 100 billion), according to iResearch. Meituan’s services also include restaurant review sites and bike sharing.

The company sold 187 million shares at HK $ 273.8 ($ 35.26) each, near the upper end of the indicative range set on Monday. With $ 7 billion in share sales, the deal is the sixth-largest consecutive share sale by a Hong Kong-listed company, according to Dealogic data.

The convertible bond offers a zero coupon rate, which means that investors buy to guarantee future gains in stocks when converting to stocks. They would see their capital repaid at maturity if the option to convert to shares was not exercised.



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