HONG KONG (Reuters) – Chinese ride-hailing giant Didi Chuxing Technology Co Ltd is looking to spin off its car services unit in a deal worth up to $1.5 billion, ahead of its expected initial public offering (IPO), people with direct knowledge of the matter said.
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While Didi has never confirmed its plans for an initial public offering, the spin-off of what is an asset-heavy part of its business could be a step in that direction. Its IPO would be one of the biggest of recent years given the company’s current $56 billion valuation.
Didi is among a number of Chinese firms that are actively looking to raise capital. Its rival in the food delivery space, Meituan Dianping, is planning a float in Hong Kong, backed by recent reforms in the financial hub that pave the way for tech firms with weighted voting rights to list.
Didi is hoping to raise $1-$1.5 billion by spinning off its car services unit and has tapped long-term investor SoftBank Group (9984.T), among others, the sources told Reuters.
It currently values the unit at between $2 billion and $3 billion, the sources added.
Didi declined to comment, while SoftBank did not immediately respond to a request for comment. The sources declined to be named as the information was confidential.
The Chinese ride-hailing giant had in April launched the car services unit – which brought together its car rental, sales, maintenance, sharing and gas services businesses.
At the time, the unit operated in over 200 Chinese cities with a network of over 5,000 partners and downstream vendors.
Didi had said the unit’s annualized gross merchandise value was expected to rise almost threefold to above 90 billion yuan ($13.4 billion) by the end of the year.
The mobile app where users can hail taxis, privately-owned cars, car-pools and even buses in some cities remains Didi’s core business. Didi cemented its spot as China’s top ride-hailing firm when it bought Uber’s local operations in 2016.
It has since expanded into a number of markets worldwide, including Southeast Asia, Brazil, Mexico and Australia, by either taking stakes in local ride-hailing firms or rolling out its own services.
The company has also launched a food delivery service to compete with Meituan-Dianping, China’s dominant startup in that area, which is planning an IPO of over $4 billion in Hong Kong in the coming months.