Are Mobike and Ofo Merging?

By That's, October 8, 2017

Is 'Mofo' soon going to be a thing?

Earlier this week, reports emerged that investors of Mobike and Ofo were in talks to merge China's two largest bike-sharing startups.

Citing people familiar with the matter, Bloomberg reported that investors were in the preliminary stages of a potential merger aimed at ending the highly competitive (and costly) battle between the two rivals and moving forward with a single dominant player in an extremely hot industry.

A "truce at home" could help the two companies in their global expansion efforts, which already includes the US, Europe and other parts of Asia. Combining to join forces would also allow them to raise prices and cut back on the number bikes of bikes flooding the streets in cities around China, which has become somewhat of a headache for local governments.

Mobike and Ofo's combined valuation would likely exceed USD4 billion, with Tencent-backed Mobike having an estimated value of USD3 billion and Alibaba-backed Ofo at USD1 billion. The investors are currently discussing issues like how to split equity between the two firms under a merger, Bloomberg reports.

But Bloomberg's unnamed sources noted that discussions were still in the early stages and "may not be consummated." Meanwhile, an Ofo spokesman declined to comment, and Mobike issued a statements denying it was considering a merger — echoing previous statements from founder Hu Weiwei that there was no possibility of a merger.

"The bike-sharing sector features asset-heavy business models and there is no point in merging or acquiring others," Hu said in June.

A merger in a cutthroat industry would not be without precedent for the two firms' tech giant investors. In 2015, China's top ride-sharing platforms — Didi Dache (backed by Tencent) and Kuaidi Dache (backed by Alibaba) — merged to form Didi Chuxing, which then went on to swallow its final major competitor Uber a year later. The same year, Alibaba-backed Meituan and Tencent-backed Dianping merged to dominate the group-buying market.

Some believe that a monopoly in the bike-share industry is only inevitable, too.