Mega-deal involving Chinese online giants

The deal represents a coming together of three of China’s most powerful online retailers - Tencent is a leading provider of internet value-added services, JD.com is the country’s largest retailer and Vipshop is a leading online discount retailer for Chinese brands.
Pursuant to the share subscription agreement, Tencent and JD.com will subscribe for newly issued Class A ordinary shares of Vipshop in the amount of approximately US$604 million and approximately US$259 million, respectively. The purchase price will be US$65.40 per Class A ordinary share, equivalent to US$13.08 per American Depositary Share (“ADS”) of Vipshop, five of which represent one Class A ordinary share. The purchase price represents a 55% premium over the closing price of the ADSs as of the most recent trading day, December 15, 2017.
The transaction is expected to close in the near future, subject to usual closing conditions. Upon the closing, Tencent and JD.com will beneficially own, taking into account any existing holding, approximately 7% and 5.5%, respectively, of Vipshop's total issued shares. The Class A ordinary shares issued to Tencent and JD.com will be subject to a two-year lock-up restriction. Tencent and JD.com will have the right to appoint a director and an observer, respectively, to Vipshop's board of directors during the two-year lock-up period. After the end of the lock-up period, for so long as Tencent and JD.com hold approximately 12% and 8%, respectively, of Vipshop's total issued shares, or otherwise by mutual agreement with Vipshop, they will maintain director and board observer rights.
Concurrently with the entry of the share subscription agreement, Tencent and JD.com have entered into business cooperation agreements with Vipshop, effective upon closing, establishing a cooperative relationship among Tencent, JD.com and Vipshop. Under these agreements, Tencent will grant Vipshop an entry on the interface of Weixin Wallet enabling Vipshop to utilise traffic from Tencent's Weixin platform, and JD.com will grant Vipshop entries on to both the main page of JD.com's mobile application and the main page of its Weixin Discovery shopping entry. It will also assist Vipshop in achieving certain GMV targets through JD.com's platform, said Eric Ya Shen, Vipshop's Co-founder, Chairman of the Board of Directors and Chief Executive Officer.