By Michael Newlands
The world’s largest Chinese language search engine and network of web sites has been formed by the merger of a subsidiary of China’s only large-scale privately owned IT company, the Stone Group, and US-based Sina Media Co Ltd. The network of web sites covering mainland China, North America, Taiwan and Hong Kong provided by the merged company has been renamed Sina Net.
The merger creates a new $50m company, Richsight International Ltd, which is 60% owned by Stone’s Hong Kong-listed arm and 40% by Sina Media. The agreement, announced yesterday in Beijing, is a significant milestone in China’s IT history as it is the first time a local IT firm has taken control of an overseas company. It is also one of the first occasions on which any Chinese non- state-owned firm has absorbed a non-Chinese Company.
Stone Rich Sight, Stone’s software arm, was one of the first Chinese companies to have a web presence when it launched Richsight Online in 1993. Sina Media, founded in the US in 1995 by three university students, operates the largest Chinese language web site outside mainland China. The combined Sina Net is expected to get upwards of 400,000 visitors a day.
The merger represents the most important link to date in the growing worldwide Chinese language web, which has sites and users in scores of countries but which will come to be dominated by China as the number of internet users there surges in the next few years. There is no overlap of customers between our two companies at the moment. But if we do not ally, we will have to compete in the future, hence the merger is a good choice for both, said Wang Zhidong, president of both Stone Rich Sight and the new company.
Sina Media’s e-commerce experience from the US will be transferred to China, where e-commerce is in its infancy, and Stone will use the overseas web sites to sell its market-leading Chinese operating system, RichWin, and other software packages to the international Chinese-speaking community.
Wang said the new company is already in talks with potential investors, including investment banks and international information technology firms, for a private placement to fill a $20m gap in capital requirements prior to a planned listing on Nasdaq in the second half of 1999. It will also consider listing on The Gem, Hong Kong’s second board which will launch late next year. There are many opportunities and several major international commercial banks have contacted us about underwriting our listing in the US, said Daniel Chiang, chairman of the new company and president of Sina Media.
Neither Stone Rich Sight nor its parent company is new to raising international capital. Stone Group Corporation was launched by a group of scientists and technicians from the Chinese Academy of Sciences who borrowed $2,400 from a local credit cooperative to kick it off in May 1984. Today it is China’s sixth-largest electronics company with revenues last year of $795m and a target of $1.2bn by 2000.
