Youon affiliate, Hellobike join forces in first bike-sharing merger deal

Updated 2017-10-26 10:02:57 Global Times

Shanghai-listed Changzhou Youon Public Bicycle System Co saw its share price edge up on Wednesday after the company announced a merger between one of its affiliate companies and Shanghai-based Hellobike late Tuesday on its website, a move that analyst said was surprising.

Youon's shares rose 1.71 percent to close at 71.50 yuan (.76).

This deal is the first merger in China's bike-sharing sector, the Guangzhou-based 21st Century Business Herald reported Wednesday.

Shared bike operator Youon said after the merger between Jiangsu Youon Ditan Keji, in which Youon has a 38.17 percent stake, and Hellobike, the competitiveness of Ditan Keji in the low-carbon bike-sharing business would be enhanced, a post on its website said. Youon is based in Changzhou, East China's Jiangsu Province.

Chen Liteng, an analyst at the Hangzhou-based China e-Business Research Center, told the Global Times that he was surprised.

"By burning money, different brands have gained different market shares. First- and second-tier cities are seeing a duopolistic market split by leading players ofo and Mobike. Small and medium-sized players are competing in third- and fourth-tier cities," Chen continued.

"The sector's development is facing difficulties since various local governments issued regulations on new bikes," Chen said. "More smaller brands might be driven out of the game, as ofo and Mobike are optimizing the market structure and user experience."

Small and medium-sized players might be especially affected as there is limited market capacity in third- and fourth-tier cities, where the local governments might not grant access to many brands, Chen pointed out.

Besides merger and acquisition deals, smaller players can consider vertical integration in selected niche markets, while cooperating with the government.

"Hellobike has expanded at the town level, achieving impressive outcomes," Chen said. "HelloBike stresses this is a merger, not a takeover, meaning that the company's development is still on the right track."

Founded in 2010, Youon held an IPO on the Shanghai Stock Exchange on August 17, becoming the first listed company in the bike-sharing sector. Youon's core business in the bike-sharing sector is production and operation, according to the company.

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