Two U.S. hedge fund firms are among a group of investors buying stakes worth $600 million in combined Chinese taxi-hailing service Didi Dache and Kuaidi Dache, which is expected to increase the company's current value by almost 50 percent, the Wall Street Journal (WSJ) reported on Wednesday.
Coatue Management LLC, a New York-based hedge fund firm, is leading a consortium of investors in buying the shares in Didi Dache and Kuaidi Dache, the two top Chinese car-hailing apps that merged in February, according to the report.
Coatue is purchasing about $250 million while another asset management firm Farallon Capital Mangament LLC is buying about $75 million, said the report. The other investors were not revealed.
Kuaidi Dache's PR representative told the Global Times Wednesday that the company refU.S.ed to comment on the reported purchase.
In the new deal, a $600 million stake being sold is a portion of the common shares held by Kuaidi Dache's management team, which prompted the speculation that the team is expected to leave its senior management roles in the next six months, according to the WSJ.
Kuaidi Dache's PR told Global Times he would not confirm if their senior management team would be replaced though he said "they still have an independent bU.S.iness to operate and it takes time for the two teams to get familiar with each other."
The deal increases the company's value to $8.75 billion, up from its current $6 billion, said WSJ. This is lower than its U.S. competitor Uber, which is reportedly valued at $41 billion.
Analysts said the high valuation is mainly driven by investors' expectation for the combined entity.
The merger helped the two car-hailing service companies to end the growing competition with each other, Zhang Xu, analyst from Beijing-based market firm Analysys International, told Global Times.
Didi Dache and Kuaidi Dache, backed by China's Internet giant Tencent Holdings and e-commerce giant Alibaba Group Holding respectively, announced they would merge in a $6 billion deal on February 14.
"The combined company controls almost the whole taxi-calling app market now in China," Zhang said, adding that the rising value also reflects the booming O2O (online to offline) indU.S.try in China.
Still, some hedge fund insiders said it should be cautioU.S. about the purchase of shares of unlisted tech start-ups like Didi Dache and Kuaidi Dache.
A Hong Kong-based hedge fund manager, who refU.S.ed to be named, told Global Times on Wednesday that the high valuation of the new combined company could be generated from an overheated private market.