Under Pressure from Regulators... Chinese Tencent Withdraws from Meituan (Comprehensive)

JD.com follows with Meituan's 91% stake special dividend
Government surrenders to antitrust regulations

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] Tencent, one of China's leading big tech companies, is reducing its stake by distributing most of its Meituan shares to shareholders as a special dividend. This move is interpreted as a step to withdraw amid the government's strengthened antitrust regulations. At the end of last year, Tencent also avoided regulatory pressure by distributing its shares in JD.com to shareholders.

According to Chinese economic media Caixin on the 17th, Tencent announced yesterday, while releasing its Q3 earnings, that it will distribute 958 million Meituan shares it holds to shareholders as a special dividend. At the same time, Tencent Chairman Liu Chiping resigned from his position as a non-executive director of Meituan.

Accordingly, Tencent will distribute 958 million Meituan (Class B ordinary shares) shares it holds as a physical dividend to eligible Tencent shareholders on a basis of "1 share for every 10 shares." Considering Meituan's closing price yesterday (HKD 162.3 per share), the Meituan shares to be distributed this time amount to a total of HKD 155.4 billion (approximately KRW 26.4413 trillion).

According to Meituan's semi-annual report, as of June 30, Tencent held 1.0546 billion Meituan shares, making it the largest shareholder with a 19.75% stake. Through this dividend, Tencent will dispose of 91% of the Meituan shares it held. Tencent expects the dividend to be completed by March next year.

[Image source=Yonhap News]

Tencent's decision to dispose of shares after investing in Meituan since 2014 is interpreted as a response to the Chinese authorities raising regulatory levels by strengthening crackdowns on monopolies and unfair practices of big tech companies through amendments to the antitrust law. Last year, China's top leadership presented "antitrust and prevention of disorderly capital expansion" as one of the eight major policy tasks at the Central Economic Work Conference, and in February of the same year, announced and implemented the "Platform Economy Antitrust Guidelines" effective immediately. In 2021, China's antitrust enforcement agencies detected 175 cases of antitrust law violations and imposed a total fine of RMB 23.529 billion (approximately KRW 4.414 trillion), with internet sector fines totaling RMB 21.74 billion, accounting for 92.1% of the total. At that time, Alibaba was fined a record RMB 18.2 billion for abusing its dominant market position, including "forcing exclusive sales within the platform."

According to Tencent's financial report, as of the end of Q3, the value of the stakes Tencent directly or indirectly holds in listed companies was RMB 376.076 billion, down RMB 258.585 billion just this year. Since the beginning of the year, Tencent has disposed of stakes in several companies it invested in for nearly 10 years, including Singapore's Donghai Group, Bubucao, New Oriental, and Huayi Brothers.

In particular, at the end of last year, Tencent distributed 457.3 million shares, representing 86.4% of its JD.com shares, to shareholders as a special dividend, similar to this time. The JD.com stake was worth HKD 127.7 billion based on the Hong Kong stock market closing price on the announcement day. At that time, Chairman Liu Chiping also resigned from JD.com's board.

Meanwhile, Tencent still holds stakes in several big tech companies. As of the end of last year, it held a 17.24% stake in the video platform Kuaishou Technology and an 11.2% stake in Bilibili, making it the largest and second-largest shareholder, respectively.