JD Capital Invests in U-Tour: Brawn and Brain Strategy Towards 100-Bn Market Value

2016-09-22

According to its latest performance report, U-Tour, a listed travel company, grossed 4.453 billion yuan over the first two quarters this year, registering a year-on-year increase of 41.99%.
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Over the first half of 2016, gloomy global economy has taken a toll on outbound traveling in China, slowing it down for the first time in six years. U-Tour, however, has managed to fare well amid the temporary doldrums on the outbound tourism market, an achievement couldn’t have been made without the company’s preemptive measures during the earlier merge and acquisition craze.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

As early as in 2011, U-Tour has forged cooperation with JD Capital, an established equity investment agency in China. After its successful IPO on the A-share market, U-Tour embarked on its way of expansion through a series of mergers and acquisitions, making itself a profit miracle for many investors on the A-share market, and the NO.1 outbound traveling service provider in China.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Acquisition of Zhuyuan International Travel Agency makes U-Tour a bellwether in China’s outbound travelling marketvnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

“The past three months has been the most ‘difficult’ time of my 20 years of profession. Not because I’m struggling for survival, but because I’m standing at a crossroad.” This is what GUO Hongbin, CEO of Zhuyuan International Traveling Agency, wrote in an email to his employees in September 2014, when the biggest merge case in China’s outbound tourism industry was bubbling to surface: after halting its stock trading for nearly three months, U-Tour announced to have completed its reorganization with Zhuyuan. The two former competitors will combine their strengths and cooperate to expand. Together, they stand to maximize the sharing of hundreds of billions dollars’ profit of China’s outbound tourism industry. vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The reorganization sent the stock price of U-Tour skyrocketing and its market value spiraling. Since it went to market in early 2014, U-Tour had become the stock of the year with an amazing annual increase of 300%.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

As a matter of fact, Zhuyuan had been preparing for its own IPO before merging with U-Tour. When asked abouthow they managed to persuade Zhuyuan, a spokesman from JD Capital replied, “Indeed Zhuyuan was on its way to IPO at that time, and had received generous offer from other agencies. Nevertheless, it takes quiet a long time to issue IPO, during which time the company would risk missing the prime time of the industry.”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

“Besides, the combined revenue of U-Tour and Zhuyuan, the two leading companies in the industry, amounts to less than 10 billion dollars, evidencing the fragmented competition layout of the industry. In 2014 alone, about 100 million Chinese people traveled abroad, spending a total of 102 billion dollars, the highest in the world followed by America and Germany. Therefore, through merging, the two companies can pool together their resources to better tap on the under-exploited market, reap the lion’s share of the growing industry profit, and finally acquire benefits exceeding the sum of their separate gains.”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

For many people, with China’s outbound tourism industry growing at its fastest pace, the combination of U-Tour and Zhuyuan has come at the right time to build the No.1 brand in the industry. JD Capital, on its part, has reaped rich return on its investment during this industrial merge and acquisition upsurge.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Joint acquisition of Club Med with Fosun leads U-Tour to the worldvnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In autumn 2014, a careless suggestion led to U-Tour’s conclusion of a landmark overseas acquisition – the joint acquisition of Club Med, the largest operator of chain vacation villages in the world.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

One of the staff from JD-Investment on the project said, “During a talk with U-Tour, I chanced to suggest an acquisition of Club Med. Little did I expect they readily went on board and chose us for project implementation.”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Founded in 1950 and went public on the Paris bourse in 1995, Club Med is one of the most renowned brand in global tourism industry. With “health” as its service principle and boasting a revolutionary one-stop service, Club Med’s market value once exceeded 2 billion euros. As of 2014, Club Med owns over 60 holiday hotels across the globe. However, industry competition and economic depression in Europe dragged down its stock price from 56 euros in 2007 to only 15 in 2014, triggering an intense fight for acquisition of Club Med.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In June 2010 after financial crisis, Fosun Group, a famous institutional investor in China, became a major shareholder of Club Med. In 2013, Fosun planned to purchase Club Med; only the plan was mothballed after its tender offer was foiled by an Italian consortium. Therefore, JD-Investment started the project by contacting Fosun for a joint purchase.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

After finally getting in touch with officials from Fosun’s headquarter in Shanghai, the project team from JD Captial flied at the very night to Shanghai with a well-designed joint purchase plan, in the hope of persuading Fosun to join the action. It was not long before Fosun agreed to send a team to Beijing for a detailed discussion.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Finally, leaders of China’s two top investment agencies met in Beijing, where they settled down final details of the acquisition of Club Med.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

After several rounds of quotation and negotiation in France, the project team of JD Capital finally had their efforts repaid: on February 12, 2015, AMF, the financial authority of France, announced that China’s purchasing group led by Fosun won the bid for tender offer of Club Med at the price of 24.60 euros per share. The purchase was concluded on February 9 with China’s purchasing group as the only bidder after Andrea Bonomi, an Italian billionaire, dropped out.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

According to insiders, buying Club Med is a key investment in overseas resources for U-Tour. Long before the acquisition U-Tour has become the largest distributor of Club Med in China, with nearly 100 million customers among which a high percentage are middle-class ones. Similarly, as a high-end chain holiday village with more than 60 holiday hotels in Europe, Africa, America and Asia-Pacific, Club Med’s target customers are also those from middle class. With the same target group, two companies stand to generate huge synergistic effect.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

A manager from JD Capital says, “With the hugely increasing per-capital disposable income in China, most Chinese tourists have gone from sight-seeing to holiday going. We predict that, in the future, China will have the world’s largest middle class of at least 100 million people. Therefore, creating tourism products that meet their needs is the No.1 priority for leading companies in the outbound tourism industry.”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

As a matter of fact, the synergistic effect didn’t take long to kick in. Since 2015, U-Tour has released dozens of tourism products featuring Club Med, among which Maldives Club Med and several others are the most popular. Thanks to this acquisition, more and more Chinese consumers are entitled to relax in top holiday villages at lower prices.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

For U-Tour, this acquisition is just its first step toward the global market with more overseas merges and acquisitions on the way.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Cooperation with Uzai.com introduces initial building of on-line channel and official layout of online-resourcesvnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In December 2014, U-Tour announced its strategic cooperation with Uzai.com and the purchase of 15% of its share, marking the beginning of U-Tour’s on-line endeavor.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

According to foreign experience, price war is not the way for a larger market share, and off-line service is a major stable profit source in the holiday tourism industry. Therefore, building a well-developed online channel and improving customer loyalty can help U-Tour consolidate its position as the leading company in the outbound tourism industry, while the nearly 100 million customers promise huge space for growth.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Marriage with Huayuan and Ctrip.com marks the completion of integrated layout of outbound tourism wholesale businessesvnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In early March 2016, U-Tour announced its plan to purchase 100% stock of Huayuan International Travel Agency. After the acquisition, Ctrip.com, the largest shareholder of Huayuan International, will hold about 5% of U-Tour’s share. This reorganization, upon completion, will pool together the two companies’ resources of product design, up-stream purchasing and down-stream customer, further consolidating and expanding the market share of U-Tour. The integration and reorganization of outbound tourism wholesale industry can be completed and the maximization of its market share will the only goal of U-Tour.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

Besides, after the reorganization, Ctrip will also become an important shareholder of U-Tour. The two sides are expecting strategic cooperation at multiple levels.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Combination of resources and customer plow promises a comprehensive service platform for outbound traveling vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The core strategy in the merge and acquisition proposal designed by JD Capital for U-Tour attaches equal emphasis to resources and customer flow. This strategy has guided U-Tour through dozens of mergers, acquisitions and cooperation cases over the past two years. Apart from the above-mentioned expansion measures, U-Tour has taken the following steps:vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(1) Bought into the annual trip business of the Traveling Channel, introducing a new business model of T2O (TV to Online);vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(2) Invested in Xingtianxia.com, a website specializing in traveling products destined for Australia and New Zealand, expanding market share in the two countries;vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(3) Invested in USTYY, an American traveling website, and created the brand “West Coast Holidays”, enriching the company’s upstream resources and increasing its revenue on the whole;vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(4) Cooperated with 263 Communication to explore tourism communication businesses in North America, aiming to build a comprehensive service platform in America;vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(5) Invested in Tianjin Uhouzz Network Technology Co., Ltd with partners, tapping into the service industry for students studying abroad.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(6) Invested in Hangzhou Star Immigrants Company, supporting in the upgrading of existing business and immigrant services.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

(7) Invested in Kaiyuan Trip, a German travel agency for Chinese people, reorganizing U-Tour’s upstream resources in Europe.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

At present, U-Tour has established itself into a comprehensive outbound tourism service platform. Its service and products have went beyond tourism into various of other categories needed by Chinese abroad, including immigrating, studying abroad, overseas medical care, and shopping, etc.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司


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Initiation of “Leading Company Plan” portrays a blueprint towards a 100-bn market valuevnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

In its 2010 investment report on U-Tour, JD Capital predicted that “China’s outbound tourism industry will enter the fastest growing period in the next five years.” Indeed, the industry had been growing by leaps and bounds from 2011 to 2016, which can be best exemplified by U-Tour, whose market value skyrocketed from less than 1 billion RMB (net profit 30 million RMB) in 2010 to nearly 20 billion RMB today.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

According to statistics, among all private companies in China, only 11 or 0.39% of them have a market value of over 10 billion dollars, while the figure in America is 659 (9%). The stark contrast prompted JD Capital to put forward the “Leading Company Plan”, a strategic investment plan.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

By the “Leading Company Plan”, JD Capital will hold some or a majority amount of shares in companies distinctly or potentially leading in various industries. Then, it will usher these companies onto a way of expansion: with sustainable financing from China’s capital market, these companies will expand market shares through horizontal merges and acquisitions, improve their bargaining power on industry chain through vertical ones, go global through cross-border ones, and improve their core competence through Internet and other marketing tools. In this way, these companies will leap into the 10 billion club and become industry leaders not only in China, but also in the world.vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

At a meeting of JD Business School, CAI Lei, founder and president of JD Capital, made a speech on ways helping increase the market value of a leading company to 100 billion RMB. CAI quoted, “A country cannot achieve prosperity without brawn, and the prosperity will not sustain without brain. As it may take wealth to emerge to the sky, it takes people’s support to stay afloat. With both brawn and brain, wealth and public support, that’s what makes a country an empire. Isn’t this what the Way about?”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

The emergence of U-Tour to an industry giant with a market value of 100 billion RMB through mergers and acquistions is a perfect practice of the “brawn and brain” strategy. Looking back on the growth path of U-Tour, a spokesman of JD Capital says, “We at JD Capital are pleased to have witnessed the emergence of U-Tour, and we hope to join in the growth path more leading companies. There will be more good news.”vnd九鼎投资(600053.SH)_上交所私募股权投资领域上市公司

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