Tencent-backed Meituan review-to-delivery start-up seeks IPO at US$60 billion

Meituan Dianping, the Chinese food reviews and delivery giant backed by Tencent Holdings, has begun discussions on a Hong Kong initial public offering as soon as this year, according to people familiar with the matter.

The company is weighing a valuation of at least US$60 billion and is considering a listing in China as well if policy conditions allow, the people said, asking not to be named because the matter is private. Discussions however are at a preliminary stage and deal details could change, they added. Meituan declined to comment.

Meituan, the world’s fourth most valuable startup with a latest valuation of US$30 billion, is emblematic of a generation of up-and-comers that have emerged to challenge the dominance of Tencent and Alibaba Group Holding. It provides on-demand and local services akin to a mash-up of Groupon, Yelp and Deliveroo, and is moving into new areas such as ride-sharing and travel.

Formed by the merger of Meituan and Dianping, it’s grown into a super-app hawking everything from group-buying deals and ride hailing to travel packages and payments. With a few taps to navigate its smartphone apps, Chinese customers can order up hot meals, groceries, massages, haircuts and manicures at home or in the office. Founded in 2010 by Wang Xing as a Groupon-alike, it handled $57 billion of transactions last year between about 320 million active buyers -- about the size of the American population --- and more than four million merchants.

If it gets the desired valuation, it could rival Uber Technologies Inc. as the world’s largest startup and represent a doubling in size. The company however faces formidable rivals in each of its key businesses. It’s competing with entities backed by Alibaba in food delivery, with Didi Chuxing in ride hailing, and even with its own backer Tencent in payments. Investors also question whether it can sustain growth without a heavy cash burn.

“Meituan attracts huge traffic volume. It’s adding many new services and showing that it can monetize the business,” said Li Yujie, an analyst with RHB Research Institute Sdn in Hong Kong. “As a platform business, it’s justified that the company is seeking this kind of valuation, and investors are still willing to give high-traffic platforms a premium.”