Digital Payments and Tourism: Lakala bought out by Tibet Tourism

A tightening regulatory policy towards third party payment has driven China’s payment industry into a period of consolidation and M&A. For some, this has been a great opportunity to get into other segments of the market like O2O (online to offline). We saw this in 2015 when Wanda bought 99bill. This time it’s Lakala with a help of with a company called ‘Tibet Tourism.’

Tibet Tourism announced a plan to wholly-acquire Lakala through the issuance of stock and cash payments to the 46 individuals and companies who currently hold equity. According to the deal 2.5 billion will be paid in cash and the entity will issue 8.5 billion RMB worth stock of stock to cover the 11 billion valuation of Lakala (although this may change). 

Lakala had intended to go public overseas through a VIE (variable interest entity) structure, but it seems that the partnership with Tibet Tourism was too attractive to pass up. Tourism has been growing in China for years with an increasing number of Chinese traveling overseas. Still, approximately 45-50% of the travel transactions happen offline so there’s a big opportunity to incorporate digital payments in the business model.

In the end, the consolidation in the digital payment industry will lead to a more stable industry. What is amazing is the companies that are doing the acquiring. Although rumours are that China’s O2O industry is struggling, clearly others see continued opportunity.