Aug. 23 (Bloomberg) -- Renren Inc., the owner of a social media website in China, jumped to the highest level in a week in New York after selling a majority stake in its group-buying online unit to Baidu Inc.
American depositary receipts of Renren increased 6.2 percent to $3.61 at 10:29 a.m. The ADRs gained as much as 12 percent earlier. Shares of Baidu slipped 0.7 percent to $138.51, the biggest drop in a week.
Baidu, China’s most-used online search engine, will buy about 59 percent of social commerce website Nuomi.com from Renren for about $160 million, according to a PR Newswire statement. Nuomi had merchandise sales of about $120 million in the second quarter, the companies said. The acquisition is expected to be completed in the fourth quarter, according to the statement.
“This divestiture is beneficial to Renren’s financial positioning as it exits the cash-burning group buy business,” Cynthia Meng, an analyst at Jefferies Group LLC, wrote in an e- mailed note today. “We see no fundamental change in Renren’s core social network services business.”
Jefferies upgraded Renren to hold from a sell equivalent, maintaining a price target of $3.3.
“The deal is expensive and will be dilutive to Baidu,” Beijing-based 86Research Ltd. said in a note, adding it values Nuomi at an estimated price-to-sales ratio of about 10, more than three times Groupon Inc.’s multiple. Nuomi is unlikely to “break even in the foreseeable future,” the note said.
--Editors: Marie-France Han, Tal Barak Harif