HONG KONG — China’s Meilishuo.com, a fashion retailer backed by Tencent Holdings, is merging with rival Mogujie.com to form a company with $3bn in sales, marking the latest alliance in the country’s e-commerce industry.
Mogujie founder Chen Qi will become the CEO of the merged entity, and Tencent will increase its investment, according to a statement by the new company. The combined company,with sales of 20-billion yuan last year, is also valued at $3bn, according to an e-mail Mr Chen sent to employees on Monday.
The deal will help the companies compete with Alibaba Group Holding and JD.com, which dominate a Chinese e-commerce industry projected to expand to 3.6-trillion yuan ($547bn) this year.
Smaller operators are combining to gain scale and end costly battles for market share.
The combination of the fashion sites, both backed by Hillhouse Capital Management, follows the mergers of travel sites Ctrip.com International and Qunar Cayman Islands and group-buying start-ups Meituan.com and Dianping.com.
"They are following in the footsteps of other company mergers as funding has become tight," said Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong. "It’s not like they have irreplaceable resources, and hence investors are pickier in such a competitive industry."
Tencent shares fell 3.2% in Hong Kong to HK$138, compared with a 2.8% decline for the benchmark Hang Seng Index.
Tencent, in which Naspers owns about a third, is down 9.5% so far this year.
Meilishuo had sought to raise about $300m since April, people familiar with the matter have said. The company, whose name means "Beauty Talk", was considering a US initial public offering at a $2.5bn valuation, it was reported last year.
Mogujie, which was founded in 2011 and also backed by IDG and Qiming Venture Partners, has 130-million registered users and raised a D round of more than $200m in November, according to statements from the company last month.
Meilishuo, founded in 2009 by Xu Yirong, runs an online marketplace selling clothes, shoes and handbags.
It has about 15,000 merchants on its website and runs a cellphone application that has been downloaded 100-million times, according to a company brochure distributed in April.
The company did not respond to an e-mail seeking comment. "The enhancement after the merger can help us race ahead of any other company that attempts to compete with us," Mr Chen said in the letter.