Tencent and JD.com agreed to invest US$863 million in Vipshop, an online retailer of branded products largely through flash sales.
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The price to acquire newly issued shares in Vipshop was US$13.08 per American Depositary Share (“ADS”) or a 55% premium to its share price of US$8.44 per ADS. Vipshop’s shares rallied over 39% to close at US$11.75 per ADS after the announcement.
Tencent and JD.com will own 7.0% and 5.5% of Vipshop post this investment. As part of the investment, Tencent will give Vipshop a dedicated spot on Weixin digital Wallet and JD.com will also grant Vipshop real estate on some of its shopping portals.
The investments marks a significant ramp up to compete with Alibaba’s dominance in China’s e-commerce and retail space and could be a pre-cursor to an outright acquisition of Vipshop by JD.com.