Investors In Mobike And Ofo In Merger Discussions

Reports indicate that investors in Ofo and Mobike are engaged in discussions aimed at pushing for a merger between the two of the biggest bike-sharing firms in China. This will put an end to the costly competitive battles between the two and thus create one dominant player in a segment that is growing fast. The talks are in an early stage and it is not guaranteed that they will lead to anything.

Among the issues that the investors in the two firms have been grappling with include ways of splitting equity. It is believed that the combined value of the two firms is currently $4 billion. The two bike-sharing giants are backed by two giants in China’s technology sector – Tencent Holdings and Alibaba Group Holding. Both Alibaba and Tencent have established a record of putting money in rival startups before combining once a leader emerges in a bid to save money.

Global expansion

The bike-sharing startups in China are different from ride-hailing services in that they are pioneers are looking to expand abroad. If they come to an agreement they will have more resources available to them and this will assist them once they launch in other countries in Asia as well as Europe and the United States. Though an Ofo spokesperson refused to comment, a statement issued by Mobike claimed that a merger was not being contemplated.

“Mobike is the clear leader in the global bikesharing industry, supporting 30 million rides in 180 cities around the world every single day. We are fully focused on extending our global success,” the statement read.

Proxy battles

A few years after they were founded the bikes belonging to the two Chinese startups have become a common sight in Shanghai and Beijing. Combined the two have managed to raise over $1 billion in funding. Tencent and Alibaba have also used the two firms as proxies in a battle for cloud computing, mobile payments and user data.

Four months ago Hillhouse, TPG, Sequoia Capital and Tencent led in a Mobike funding round that raised $600 million. A month later investors that included Citic Private Equity, Hony Capital and Alibaba raised over $700 million for Ofo.

According to research firm CB Insights, Ofo’s valuation is $1 billion while that of Mobike is $3 billion. Ofo’s goals include having 20 million bicycles in 20 countries before the end of this year. Though bikes in China were once associated with the socialist working class they have become popular as a way of getting around heavy traffic in cities.