Tencent's offices in Shenzhen. (Photo/CFP)
Chinese internet giant Tencent plans to invest in JD.com, the shopping website also known as Jingdong Mall and formerly 360buy, aiming to break the dominance of rival Alibaba in the e-commerce sector.
Tencent reportedly plans to give JD.com its Yixun e-commerce business in exchange.
Sources revealed that a deal worth US$500 million has been finalized and Tencent's e-commerce branch would be integrated with JD.com, according to Hong Kong's Phoenix Television. An official announcement is set to be made this week.
Though the deal has yet to be officially confirmed, Wu Xiaoguang, CEO of Tencent E-Commerce Holding Company, confirmed that he will serve as chief operating officer at JD.com. Further, Tencent has begun to lay off employees at its online shopping department and its e-commerce department has also frozen hiring.
It is possible that JD founder Liu Qiangdong could use his plan to go public in the United States as a bargaining chip to seek a better offer from Tencent. It has also been reported that Liu wants to integrate the user data of Tencent's popular WeChat social networking app to expand JD's user base.
In order to maintain a controlling influence on the board, Liu may not let Tencent hold a larger stake that himself, so the deal with Tencent is likely to be limited to a less than 20% stake.
Tencet spent 2 billion yuan (US$330 million) to build its own e-commerce platform QQ.com and acquired rival Yixun.com but has still failed to capture a significant market share from Alibaba, which operates various platforms such as Taobao and TMall.
However, Li Guoqing, the founder of China's largest online bookstore Dangdang, said Tencent needs to fully acquire JD.com in order to expand in the e-commerce sector.