On November 16, Tencent released its financial report for the third quarter of 2022, and announced its decision to distribute most of its shares in Meituan, which will be completed in March next year. Tencent President Martin Lau has resigned as a non-executive director of Meituan.
Tencent said that approximately 958 million Class B ordinary shares in Meituan held by the group through Huai River and TML are to be distributed on the basis of an entitlement to 1 Class B ordinary share of Meituan for every 10 shares of the company held by each qualifying shareholder.
According to Meituan‘s semi-annual report, Tencent holds 1,054.6 million Class B shares of Meituan, of which Huai River and TML hold 1,018.7 million shares, which means that Tencent has sold 90% of Meituan‘s shares. Based on the stock price of HK $166.4 ($21.2) per share on November 15, the total market value of Meituan shares to be distributed is about HK $159.4 billion.
Tencent said that this decision has created considerable strategic and financial returns for the company. Meituan said that it will maintain a mutually beneficial and win-win business cooperation relationship with Tencent, including existing agreements.
It is worth noting that rumors regarding Tencent‘s sales of its Meituan holdings have been circulating for a while. In the conference call after the second quarter financial report, Tencent executives said that this rumor was not accurate. At that time, they said that the company had been optimizing its investment portfolio. Tencent reduced its shareholding of JD.com to return funds to shareholders, and carried out some stock repurchases to further lean up its investment portfolio.
In 2022, Tencent reduced its holdings of Southeast Asian e-commerce company Sea, entertainment company Huayi Brothers, private tutoring platform Koolearn and other enterprises. Tencent still holds the equity of e-commerce platform Pinduoduo, video app Kuaishou and Bilibili, ride-hailing firm Didi and others. Analysts believe Pinduoduo could be next year’s target of shareholding reduction.
The financial report shows that in the third quarter of this year, Tencent‘s revenue was 140.1 billion yuan ($19.8 billion), down 2% year-on-year, while the net profit was 39.9 billion yuan, a year-on-year increase of 1%. In terms of Tencent‘s core business – value-added services, its revenue decreased by 3% year-on-year to 72.7 billion yuan in the third quarter of this year. Among them, game revenue in the international market increased by 3% to 11.7 billion yuan, while the game revenue in the Chinese market decreased by 7% to 31.2 billion yuan.