(Chinese Version)

Left: Kuai Jiaqi, former CEO of Dada Right: Yang Jun, former CTO of Dada

On April 15th, Chinese online direct sales company JD.com Inc. officially announced that its online-to-offline unit, JD Daojia, would merge with Dada Nexus Ltd to form a new company. The announcement proved the rumor that “JD Daojia was to merge with 58 Daojia” to be wrong. Instead, JD Daojia is to merge with the crowdsourcing platform Dada.

Under the merger agreement, the new company will provide two major platforms: a crowdsourcing platform and a fresh produce O2O platform. The new company will integrate resources from Dada and JD Daojia and operate its crowdsourcing delivery platform under the Dada brand. For the fresh produce O2O platform, however, the new company will continue to use the brand JD Daojia and further cooperate with offline supermarkets, retail and convenience stores.

In addition, Kuai Jiaqi, former CEO of Dada, and Wang Zhijun, former President of JD Daojia, will serve as the CEO and President of the new company, respectively. Based on JD Daojia’s business scale and JD Group’s resources, JD.com will receive about 47.4 percent of the new company's equity for $200 million in cash and become the biggest shareholder of the new company.

Previously, TMTpost has already issued several reports on JD Daojia and Dada respectively.

Launched in May, 2014, Dada is a crowdsourcing delivery service provider for O2O platforms. Up till now, the company's network covers 37 major cities in China with a total of 1.3 million registered crowdsourced deliverymen and average daily deliveries of over one million in peak seasons. Last year, Dada launched its own O2O takeaway platform PaiFun. Under the merger agreement, this platform will be integrated to JD Daojia.

JD Daojia, launched in April 2015, provides consumers two-hour delivery of products from local supermarkets and other partners through its location-based app. In its first 12 months of operation, JD Daojia has already become the leader in China's O2O supermarket industry, covering over three million customers in 13 cities across China.

Previously, JD Daojia has also launched its own crowdsourcing platform “JD Crowdsouring”, similar to Dada. After the merger, these two crowdsourcing platforms will be integrated to each other. Some analysts suggest that JD acquired Dada mainly in consideration of its own O2O takeaway and delivery business. It is known that JD Crowdsourcing and Dada used to be rivals, yet Dada is at an advantage in terms of the motivation and management of part-time deliverymen.

“JD Daojia and Dada's business are highly complementary, so their cooperation will certainly beget huge competitive advantage for them,” Wang Li, one of the three managing directors of China Renaissance, said.

As you might have predicted, China Renaissance was again the financial advisor to this merger. In 2015, China Renaissance also assisted in the merger between Youku and Tudou, Didi and Kuaidi, MeiTuan and Dianping, as well as the investment of Tencent over JD.

The following is the internal letter from Richard Liu, founder and chairman of JD Group:

My fellow colleagues,

Today, I have a piece of good news for you: JD Group’s subsidiary JD Daojia will merge with Dada, the largest crowdsourcing platform in China and that we have already entered into a final agreement. Under the merger agreement, JD.com will receive about 47.4 percent of the new company's equity and become the biggest shareholder of the new company. In the future, the new company will not only integrate resources from JD Group’s JD Mall, JD Finance and form close strategic synergy, but also get access to JD.com's premium brand, user base and supply chain, and Dada's strength in delivery crowdsourcing. Together, we will be able to create more social values and provide consumers with a life of higher quality.

Launched in May 2014, Dada is a crowdsourcing delivery service provider for O2O platforms. With a rather young, innovative and passionate team, advanced technology as well as the in-depth understanding of the sharing economy in the Chinese crowdsourcing and logistics market, the company's network has already covered 37 major cities in China up till now, with a total of 1.3 million registered crowdsourced deliverymen and average daily deliveries of over one million in peak seasons.

JD Daojia, however, is a startup project inside JD Group. Through carrying on the spirit of innovation and breakthrough of JD Group and working hard and diligently, the over 1,000 employees at JD Daojia made it possible for JD Daojia to become the leader in China's O2O supermarket industry, covering over three million customers in 13 cities across China and providing high-quality service for a total of 3 million registered users. JD Daojia and Dada's business are highly complementary, and we both shared a deep commitment to providing fast delivery service and excellent user experience, which laid a solid foundation for the merger. During the negotiation process, Dada’s founding team, represented by Mr. Kuai, and Dada’s investors, including Sequoia Capital and DST, have been very generous and open-minded, while JD Daojia’s executives also demonstrated their professional work ethic by embracing openness, inclusiveness and cooperation. I’d like to take this opportunity and offer my heartfelt gratitude to all of you on behalf of JD Group.

Under the merger agreement, the new company will provide two major platforms: a crowdsourcing platform and a fresh produce O2O platform. The new company will integrate resources from Dada and JD Daojia and operate its crowdsourcing delivery platform under the Dada brand. Together, we will fully explore the benefits of sharing economy such as openness, connection and efficiency and provide O2O platforms with standardized, low-cost logistics service. For the fresh produce O2O platform, however, the new company will continue to use the brand JD Daojia and provide consumers with consumption experience of higher quality and convenience by further cooperating with offline supermarkets, retail and convenience stores.

Kuai Jiaqi (Philip), former CEO of Dada, and Zhijun Wang, former President of JD Daojia, will serve as CEO and President of the new company, respectively. I have every confidence to belive that the new company will continue to innovate and increase efficiencies and make us the leading player in the Chinese O2O market under their leadership. Personally, I will not be a board member of the new company, but I shall continue to help nurture the company as Chief User Experience Officer and offer as much help and support as I could. I am looking forward to seeing that all of you can work here like a big family, and that all of you will help each other and try your best here. Only then can JD Group rise and develop.

This merger is a win-win cooperation and an important step forward in building a sustainable O2O ecosystem. In the future, we shall not only strengthen JD’s competitiveness by improving user experience but also build an open ecosystem by all kinds of methods, including investment, acquisition, strategic partnership and incubation. We’d like to help more startups rise and develop, help more entrepreneurs and young people who dare to have dreams and bear the responsibility achieve their dreams by providing talents, capital, technology as well as appropriate management.

At last, I wish all the employees in the new company good luck in the following “fight”, and I wish the new company to become an indispensable player in the transition from traditional economy to Internet Plus economy in China.

Come on, guys
Yours
Richard Liu
April, 15th, 2016

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Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.