Chinese Travel Platform Qunar Raises $500M, Turns Down Ctrip Acquisition Offer

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Qunar, one of China’s largest online travel booking platforms, plans to expand its mobile business with a new $500 million investment led by Silver Lake.

Silver Lake’s portion of the investment totals $330 million in convertible bond purchases, while $170 million will come from another undisclosed investor. Qunar’s other backers include Chinese search giant Baidu, which holds a majority stake.

In its 1Q 2015 earnings report, Qunar also said that it had declined an unsolicited acquisition offer from competitor Ctrip, which is backed by Priceline, but “remain open to engaging in further discussions with Ctrip as well as other strategic players in our sector.”

Reports about Qunar-Ctrip merger discussions date back to April 2014.

While China’s online travel market is expected to enjoy double-digit growth before hitting revenue of about $75 billion in 2017, competition among rivals like Qunar, Ctrip, and eLong is fierce and expensive.

Qunar expects 2Q 2015 year-on-year revenue growth of 105 percent to 110 percent, but it said its non-GAAP operating margin would be in the range of negative 90 percent to 100 percent, more than double the negative 43.4 percent growth rate it reported in 1Q 2015.

The company attributed the increase in operating expenses to the cost of “acquiring new mobile users through offline channels.” Though Qunar expects to turn a profit by the end of 2016, the price of trying to grow in a crowded industry means that consolidation among major rivals a distinct possibility.

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