Co-Founder Of 7 Days Zheng Nanyan Proposes Qunar Go-Private Deal

An investment vehicle owned by Zheng Nanyan, a Chinese hospitality tycoon and co-founder of Chinese budget hotel chain 7 Days Group Holdings, has proposed to take Qunar Cayman Islands Ltd. private.

Ocean Management Ltd., an entity solely owned by Zheng, offered US$30.39 for each of Qunar’s American Depositary Receipt (ADR), representing a 15% premium to the company’s last closing price.

Zheng Nanyu, also known as Alex Zheng, owns major hospitality assets in China. He was one of four co-founders of Ctrip, China’s largest online travel agency. The Plateno Hotel Group, formerly known as 7 Days Group that Zheng co-founded in 2005, sold 81% stake to JinJiang Hotels in February, creating Asia’s largest hotel operator.

Units owned by Zheng owned over six million and ten million high-vote ordinary shares, or 22.8%, of Chinese online travel agency eLong, Inc., before the company was privatized by a Tencent and Ctrip consortium last month.

With his offer for Qunar, Zheng might be acting in consort with Ctrip, which would face anti-monopoly hurdles if it tries to privatize Qunar by itself, according to Chinese media reports. Currently, Ctrip owns 45% of Qunar’s aggregate voting interests.

Last October, Baidu Inc.-controlled Qunar teamed up with key rival International Ltd. to take combined control of about 80% of China’s online hotel and air-ticket markets.

But the quasi-merger came with great costs. During the first quarter, Qunar reported a 53% increase of losses despite revenues growing 48% year-on-year.

Ctrip suffered RMB1.1 billion (US$160 million) losses during the same period, even if the combined revenue of the two companies led its revenue up 80% year-on-year.

In addition to employee losses at Qunar, the company endured several partnership cancellations by major Chinese airlines, leading to a 12% drop in flight ticket sales during the first quarter.

Nina Xiang is the co-founder and managing editor overseeing editorial content and product development at CMN. Before founding CMN in 2011, Nina worked at BusinessWeek magazine in Beijing and Institutional Investor magazine in New York, writing about business and financial services. While in New York, she also served as part-time correspondent for Shanghai's financial television channel, China Business Network, as well as China Radio International, China's national English-language radio network.