Chinese e-commerce rocked: Mogujie Acquires Meilishuo for 3 billion dollars

Chinese e-commerce startup Mogujie has nailed a deal to acquire rival Tencent-backed Meilishuo. The resulting company has been reportedly valued at 2.5 billion dollars and would, without doubt, rock the Chinese online apparel retail space.

As announced by both companies earlier this week, Mogujie – which has a strong focus on fashion - will merge with Tencent-backed competitor Meilishuo, which has been called “China’s Pinterest” for its focus on female users and skincare and fashion products.

The new, combined company “plans to raise fresh funds” that could increase its valuation, according to Mogujie CEO Chen Qi in a memo to employees. Qi would remain CEO of the new entity. In the same vein, The ‘Wall Street Journal’ reports that Tencent may increase its stake in the new company.

The deal reportedly values Moguije twices as much as Meilishuo

Chen wrote in the letter that the deal values Mogujie twice as much as Meilishuo. (According to the latest estimates, Hangzhou-based Mogujie was worth 1.7 billion dollars.) The companies last year generated combined revenue of nearly 20 billion yuan, or 3 billion dollars, he added.

Mogujie, which means Mushroom Street in English, will acquire Meilishuo through share swap, The combined entity is valued at about 3 billion dollars, with Tencent Holdings – owner of Melishuo - has already agreed to increase its stake. Mogujie co-founder and Chief Executive Chen Qi will manage the new company, which had combined sales of 20 billion yuan (3.05 billion dollars) last year, according to the announcement.

“After acquiring Meilishuo, we will avoid competition and save lots of costs,” Chen wrote in an internal company letter. “The new company will provide differentiated services and focus on its long-term goal instead of short-term rivalry.”

Prior to the merger, Mogujie and Meilishuo were trying to raise more capital without much success. Hangzhou-based Mogujie completed its latest fundraising in November, raising about 200 million dollars from investors led by Ping An Ventures.

Truth is that, before the deal, Mogujie was already one of more than 100 companies on Fortune’s Unicorn List, a list of privately-held companies valued at more than 1 billion dollar, recalls ‘Fortune’ magazine.