Recently, TONGCHENGTRAVEL (00780) announced it will launch a voluntary conditional general cash offer for Dida Inc. (02559) through its wholly-owned subsidiary, a move viewed favorably by investment banks.
International investment bank Jefferies has published a research report on this acquisition titled "TONGCHENGTRAVEL's Acquisition of Dida: Unleashing Synergies in Travel and Mobility Services." The report expresses optimism about the deal, assigning a Buy rating based on a Discounted Cash Flow (DCF) model with a target price of HK$20.3.
Jefferies highlights four key benefits of this acquisition. Firstly, it allows TONGCHENGTRAVEL to swiftly enter the mobility services sector without the need to build the business from scratch, which is more efficient than developing it independently.
Secondly, TONGCHENGTRAVEL possesses a massive user base that can create synergies with the mobility business. Thirdly, Dida has years of deep operational experience in the mobility services field and is already profitable.
Fourthly, the transaction is structured as a cash payment and includes a certain acquisition premium. TONGCHENGTRAVEL is offering HK$1.3875 per share to acquire all shares of Dida, representing a 9% premium to Dida's closing price on the announcement date, with a maximum transaction financing scale of HK$1.5 billion.
According to the announcement, five major shareholders of Dida have signed irrevocable undertakings to accept the offer, representing approximately 53.7% of Dida's issued share capital. The acquisition is not intended for privatization, and the company plans to maintain Dida's listing status on the Hong Kong Stock Exchange post-transaction.
Furthermore, Jefferies identifies three strategic objectives behind TONGCHENGTRAVEL's acquisition of Dida. The first is to expand service boundaries; by integrating Dida's mobility service capabilities, TONGCHENGTRAVEL can rapidly upgrade into an integrated "accommodation + mobility" travel service platform, creating a comprehensive travel and mobility ecosystem.
The second is to explore cross-selling opportunities between travel and mobility services. TONGCHENGTRAVEL's 250 million paying users and Dida's mobility scenarios complement each other, promoting cross-category consumption.
The third is to strengthen Dida's competitive advantage in the ride-sharing sector. Dida has over a decade of experience in carpooling, with over 400 million registered users, 21 million certified drivers, and mature dispatch algorithms, featuring a light-asset, high-profitability business model.
After the completion of the acquisition, TONGCHENGTRAVEL will retain Dida's core operational team and temporarily maintain the independent operation of the "Dida" brand. Simultaneously, it will implement systematic upgrades for Dida in areas such as driver management, algorithm optimization, business scale expansion, and operational efficiency improvement.
Based on an absolute valuation method using a Discounted Cash Flow (DCF) model, Jefferies has issued a Buy rating with a target price of HK$20.3, which represents a potential upside of 68.9% from the current price.
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