* Tencent seeks to kick off Meituan stake sale this
* Sale seeks to placate regulators, monetise 8-year-old
* Stake sale likely to be done as a block trade - sources
* Move comes after Tencent's divestments of JD.com, SEA
* Meituan shares sink 10%; Tencent shares recover
HONG KONG, Aug 16 (Reuters) - China's Tencent Holdings
plans to sell all or a bulk of its $24 billion stake
in food delivery firm Meituan to placate domestic
regulators and monetise an eight-year-old investment, four
sources with knowledge of the matter said.
Tencent, which owns 17% of Meituan, has been engaging with
financial advisers in recent months to work out how to execute a
potentially large sale of its Meituan stake, said three of the
The planned sale comes against the backdrop of China's
sweeping regulatory crackdown since late 2020 on technology
heavyweights that took aim at their empire building via stake
acquisitions and domestic concentration of market power.
That crackdown, which has led to billions of dollars in
fines for the Chinese tech giants, is reshaping the companies by
forcing them to make multi-billion dollar divestments. Tencent,
for instance, is exiting a clutch of businesses now and pivoting
towards the global gaming market.
The owner of China's No. 1 messaging app WeChat first
invested in Meituan's rival Dianping in 2014, which then merged
with Meituan a year later to form the current company.
Based on Meituan's market capitalisation as of Monday,
Tencent's 17% stake is worth $24.3 billion.
Tencent is seeking to kick off the sale within this year if
market conditions are favourable, said two of the sources.
It has been reducing holdings in portfolio companies partly
to appease the Chinese regulators and partly to book hefty
profits on those bets, said three of the sources. The value of
its shareholdings in listed companies excluding its subsidiaries
dropped to just $89 billion as of end-March from $201 billion in
the same period last year, according to its quarterly reports.
"The regulators are apparently not happy that tech giants
like Tencent have invested in and even become a big backer of
various tech firms that run businesses closely related to
people's livelihoods in the country," said one of the sources.
Shares of Hong Kong-listed Meituan fell more than 10%, the
biggest daily percentage decline in five months, following the
Reuters report. Tencent shares dropped more than 2% in Tuesday
afternoon trade before recovering to be up 1%.
Tencent declined to comment. Meituan did not respond to a
request for comment.
All the sources declined to be named due to confidentiality
Tencent announced in December the divestment of around 86%
of its stake in JD.com Inc, worth $16.4 billion,
weakening its ties to China's second-biggest e-commerce firm.
One month later, it raised $3 billion by selling a 2.6%
stake in Singapore-based gaming and e-commerce company SEA Ltd
, which was seen as a move to monetise its investment
while adjusting business strategy.
Tencent has not pinned the divestment of JD.com and SEA
stakes on the regulatory crackdown.
The sale of the Meituan holding will likely be executed via
a block trade in the public market which typically takes a day
or two from marketing to completion, according to two of the
The planned Meituan stake sale via block trade would be
sizeable, and come after Netherlands-based technology investor
Prosus' sale of 2% of Tencent stake last year for $14.7 billion
that counted as the world's largest block trade.
The block trade would be a fast and smooth way for Tencent
to offload the shares, they added, compared to distributing them
as dividends or negotiating with a private buyer.
The regulatory crackdown in China came after years of a
laissez-faire approach that drove growth and dealmaking at
To fall in line, Tencent has made divestments in portfolio
companies a focus for its deals team this year and next year,
said one of the sources.
Analysts had expected Tencent to divest stakes in other
portfolio companies after its divestment of JD.com and SEA
Citi analysts said in a report in January they believed
Tencent would further evaluate and reallocate funding from more
established investments to newer technology ventures to ride on
the industrial internet growth opportunity and to align with its
social sustainability initiatives.
Besides Meituan, Tencent also holds stakes in e-commerce
company Pinduoduo Inc, video platform Kuaishou
, ride-hailing champion Didi, automaker Tesla
and streaming service Spotify.
The crackdown has heaped pain on Tencent as it has on
Tencent reported in May its quarterly profit halved from a
year ago and revenues stagnated, blaming cuts in advertising
spending by consumer, e-commerce and travel businesses for its
worst performance since it went public in 2004.
Last month, China's market regulator imposed the latest
fines on Tencent and Alibaba as well as a range of
other firms for failing to comply with anti-monopoly rules on
the disclosure of transactions.
The regulator also blocked Tencent's proposed $5.3 billion
merger of the country's top two videogame streaming sites DouYu
and Huya last year on antitrust grounds.
(Reporting by Julie Zhu and Kane Wu; Editing by Sumeet
Chatterjee and Muralikumar Anantharaman)