Ctrip-Qunar: New Traveling Mates?

A combination of Ctrip and Qunar could be coming, with Baidu as the new company's controlling stakeholder, though the deal could get vetoed by China's anti-monopoly regulator.

Apr 8, 2014 at 1:45PM

The news has been flying thick and fast few for Ctrip (NASDAQ:CTRP), including the latest word that China's oldest and largest online travel agent could be headed for a merger with fast-rising rival Qunar (NASDAQ:QUNR). The latest reports are saying such a deal is in late-stage talks, as Ctrip prepares to sell a controlling stake of itself to leading search engine Baidu (NASDAQ:BIDU), which also happens to be Qunar's controlling stakeholder.Trans

The sourcing in this new report is even sketchier than usual for Chinese media, but the report's appearance on the reputable Sina news website gives it a bit more credibility. According to the report, Baidu would buy control of Ctrip, then use its similar control of Qunar to merge of the pair. That would create a clear industry leader with a market value of about $10 billion, combining Ctrip's market cap of about $7 billion with Qunar's $3 billion. By comparison, eLong, the industry's only other major listed player, has a far more modest market value of just $550 million.

Ctrip has a strong ability to focus on its core travel services while adding well-conceived new products that complement that strength. For years, the company's main rival was eLong, which never seemed able to match Ctrip's performance, despite its backing by U.S. travel services giant Expedia.

But, the last two years have seen the arrival of a new field of more nimble competitors, led by names like Qunar, Tongcheng, and Tuniu. Ctrip and Qunar fought a bruising price war in the first half of last year, but tensions eased in the second half. That easing culminated in a surprising tie-up last fall that saw Ctrip start marketing some of Qunar's products, which could lead to Ctrip becoming a major strategic investor in Quanr's IPO.

More tie-up signs
Further signs emerged of a potential strategic tie-up after Ctrip raised a hefty $800 million through a convertible bond offering last fall, bringing its total cash pile to $2 billion at the end of 2014. But, no strategic investment ever came and, last week, Ctrip again surprised the market by announcing a program to buy back up to $600 million in shares. That announcement came after a brief period of weakness in Ctrip's stock, after the company became embroiled in a scandal involving compromised credit card data.

Considering the recent history, what's a person to make of the latest reports about a merger? Despite the shaky sourcing on the report, a merger makes sense and is quite likely to happen. Ctrip and Qunar have already shown they can work together, and savvy managers at both companies realize they can do much better together than separately. Having a major company like Baidu as their strategic parent must also be attractive.

The biggest danger could be regulatory scrutiny, as Ctrip and Qunar are already easily the two largest players in the online travel space. China's regulator has, so far, taken a hands-off approach to the rapidly consolidating Internet sector, and might maintain that stance if a Ctrip-Qunar deal is announced. But, if regulators oppose the deal, it could slow the recent pace of consolidation, resulting in a veto that would undermine both Ctrip and Qunar's stocks.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Douglas Young has no position in any stocks mentioned. The Motley Fool recommends Baidu and Ctrip.com International. The Motley Fool owns shares of Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information