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Ctrip.com International Ltd. fell the most this year after Qunar Cayman Islands Ltd. rejected the company’s buyout offer, rekindling concern that price competition will crimp the Chinese online travel-booking site’s profits.
The American depositary receipts slumped 5.3 percent to $77.27 at 1:34 p.m. in New York. Qunar, which said it received $500 million from private investors led by Silver Lake Management LLC and plans to sell 8 million new ADRs, was little changed at $46.
The companies have been grappling for customers in China’s burgeoning travel industry with promotions including discount coupons. Ctrip’s retreat came after its 39 percent stake purchase in the smaller competitor Elong Inc. drove the stock to a record on May 22. Qunar said in a statement after the close of trading Monday that it rejected the offer Ctrip made last month to acquire all of the company’s outstanding shares. Financial terms of the proposal weren’t disclosed.
“Investors are concerned about the pressure on Ctrip as Qunar has raised so much money to spend hugely on promotions,” Jun Zhang, who oversees China research at Rosenblatt Securities, said by phone from San Francisco Tuesday. “It seems like Qunar is getting itself ready for further competition.”
Jade Wei, Ctrip’s head of investor relations said in an interview Tuesday that the discussions are over and the company will focus on its recent investment in Elong. Qunar, which also reported on Monday first-quarter revenue that doubled from a year earlier while its net loss widened, will continue to use coupons to remain competitive, Chief Financial Officer Yilu Zhao said in a conference call with analysts.
Ctrip’s decline Tuesday cut its gain this year to 70 percent. Trading volume of 7.5 million ADRs was more than double the full-day average of the past three months, according to data compiled by Bloomberg.
It’s still a better choice for Qunar to work together with Ctrip, according to Jeff Papp at Oberweis Asset Management Inc.
“At some point down the line, they will realize working with Ctrip is the best bet,” Papp, a senior analyst at Oberweis, said by e-mail. “Eventually they will realize that there is no point killing each other.”
The Bloomberg China-US Equity Index advanced 0.5 percent to 133.32. The iShares China Large-Cap ETF, the largest Chinese ETF in the U.S. tracking Hong Kong shares, gained 0.4 percent to $49.49.
This article was written by Belinda Cao from Bloomberg and was legally licensed through the NewsCred publisher network.