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China’s Bitauto raises $300M, with Baidu, and Tencent each chipping in $50M

TechCrunch TechCrunch 6/06/2016 Ingrid Lunden

As the on-demand transportation industry continues to heat up in China, one of the bigger online marketplaces for cars is also capitalizing on the growth.

Bitauto Holdings — which both operates a giant car marketplace that we’ve in the past described as, Consumer Reports and Auto Trader rolled into one; and also invests in transportation startups — has announced a fundraise of $300 million. The company is traded publicly and is valued at around $1.4 billion; and this latest cash injection is partly notable because of who is making it.

Chinese search giant Baidu, WeChat owner Tencent and e-commerce portal are each taking investments of $50 million in Bitauto, which is also taking an additional $150 million from PA Grand Opportunity Limited.

Bitauto is not disclosing how it plans to use the money beyond “general corporate purposes.” The company currently makes revenues from advertising, subscriptions, transactions and marketing. Its financials and other metrics are as outsized as the wider economic growth in China: the company is profitable with revenues on the rise, and said that in the first quarter of this  year it generated 27 million sales leads and some 50,000 transactions. and Tencent were previous strategic investors, while Baidu is taking its stake as part of a new strategic partnership, in which it sounds like Bitauto will provide inventory for a new auto search on Baidu.

“We are delighted to announce today the strengthening of our strategic partnership with and Tencent, and the establishment of a new partnership with Baidu, the leader in Chinese language online search,” said Bitauto’s CEO William Li in a statement. “We are also pleased to welcome PAG, a leading regional private investment firm, as an important investor. My personal participation in this transaction is a further testament to management’s strong confidence in Bitauto’s future development.”

While the growing interest both in autos and transportation services are signs of how China’s economy (and specifically its middle class) continues to grow, what’s also interesting is the place that Bitauto might play in the bigger global transportation game of chess.

Bitauto’s CFO was reportedly in talks with Uber last year for the U.S. transportation behemoth to take a stake in Chinese carpooling company Dida Pinche, as part of Uber’s bid to increase its footprint in the country to compete better against Didi Chuxing (formerly known as Didi Kuaidi). While Uber is the biggest and most highly valued of all the on-demand transportation startups, more localized startups like Didi, which itself is valued in the billions, are giving it a run for its money. So why would Bitauto’s CFO be talking to Uber? Because Bitauto is an investor in Dida Pinche, which itself has raised over $100 million.

And, on top of this connection, Baidu is now a common investor between both Bitauto and Uber. It will be interesting to see how and if (and why) there are more connections are made here with Uber in the wake of the Baidu connection between the two.

Back to today’s news, Bitauto says that under the agreement, Tencent, Baidu and are each purchasing 2,471,577 newly issued ordinary shares of Bitauto at US$20.23 per share, corresponding to US$20.23 per American depositary share of Bitauto (“ADS”).

The PAG investment, meanwhile, is coming in the form of convertible bonds that will be due in five years with an interest rate of 2.00% per annum.

At least some of the investment will be in the form of investing to service the strategic partnerships. Bitauto had already been using strategic investments to expand its footprint:

“Through our cooperation over the past year with and Tencent, China’s leaders in world-class e-commerce, social media and big data, we have gained tremendous momentum in making Bitauto the industry leader in online automobile transactions,” said Li in a statement. “Through our new partnership with Baidu, we expect to leverage its leadership in mobile and desktop online search, big data and transaction services platforms for additional strategic advantages as we continue to create the industry leading new and used car purchasing experience for customers in China.”

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