China's classified website 58.com is still in talks to purchase its competitor ganji.com, a person close to the deal told the Global Times Wednesday.
The source refused to be publically identified or disclose more details about the deal, because the talks are private and confidential.
Shares of 58.com on the New York Stock Exchange roughly soared 34 percent on Tuesday, valuing the Chinese company at $6 billion, following the Financial Times (FT) report on Tuesday that the firm was set to announce a merger with Ganji on Wednesday. If the deal happens, the combination will become China's largest classified website, valued at up to $10 billion, according to the FT.
The merger will not be announced immediately because the two "need to decide who will hold most of the new company's shares, which is not easy to determine," Men Changhui, IT analyst from Beijing-based CCID Consulting firm, told the Global Times Wednesday.
The surge in share price reflected investors' high expectations not only for the company but also for the Chinese O2O (online to off-line) market, which has been an rising industry in recent years, Men noted.
China's O2O market size grew 42.8 percent year-on-year in 2014, according to a report released by Beijing-based consultancy iResearch in February. And O2O will be the fastest developing segment in the e-commerce market, maintaining a 20 percent growth rate in the following years, according to the report.
58.com has been expanding its O2O business in recent years, announcing in March a takeover of $34 million worth of shares in a Shenzhen-based online interior decoration service platform, to8to.com. In June 2014, China's Internet giant Tencent Holdings agreed to invest $736 million in the classified ads provider, saying that the two companies will jointly build O2O services.
The potential acquisition of Ganji, which has taken part in the O2O business since 2014, will help 58.com gain more market share in the O2O sector, said Men.
Yang Fang, an analyst from Shenzhen-based consulting firm Askci Corp, told the Global Times Wednesday that the merger between 58.com and ganji.com aims at saving costs and generating more profits.
The net profit of 58.com was $3.2 million in the fourth quarter of 2014, down 70.2 percent year-on-year, said its financial report in March.
