China's Tencent may take 16 percent stake in JD.com

SHANGHAI, China - China's largest Internet company Tencent Holdings Ltd may soon announce a deal to take about a 16 percent stake in online retailer JD.com and merge their online shopping platforms, local media reported on Saturday.

JD.com, China's second-largest e-commerce company, has a nearly 13 percent market share. Any deal between two of China's largest online companies would help narrow the huge gap between e-retailers and Alibaba Group Holding Ltd, which dominates China's booming online commerce market.

Under the deal, both companies will combine their e-commerce business, with Tencent transferring its less popular e-commerce sites, including yixun.com, to JD.com, China's major business paper Caixin reported, citing unidentified company sources.

Tencent and JD.com were not immediately available for comment.

The firms may announce the deal as early as Monday, the paper said, adding that the 16 percent stake was the minimum level being discussed and Tencent could raise the shareholding in JD.com to more than 20 percent.

China's business-to-consumer e-commerce sales may surpass $180 billion (107 billion pounds) this year due to rising internet usage, expanding middle-class incomes and a better distribution network, according to New York-based market research firm eMarketer.

Tencent, Alibaba and search engine giant Baidu Inc are competing to cash in on the rising popularity of mobile internet in China.

Tencent gets the majority of its revenue from computer games, but its mobile games are also hugely popular, according to figures from domestic app stores. Tencent's WeChat social messaging app is also used by more than half of all Chinese smartphone users.

Alibaba's Tmall marketplace controls at least half of all online retail sales and its e-Bay like Taobao controls around 80 percent of consumer-to-consumer online sales, according to data from Euromonitor.