Another jaw-dropping day in the Chinese online travel market with Qunar confirming that it received and rejected a takeover bid from Ctrip.
Qunar also said today that it has received a $500 million investment, led by Silver Lake.
The announcements co-incided with its 2015 first quarter earnings, which also included details about a change to Qunar's relationship with its majority shareholder Baidu.
On the earnings call, management referred questions about Ctrip back to its statement and held off going into more detail.
The statement said:
"On May 8, 2015, we received an unsolicited offer from Ctrip....to acquire all of our outstanding shares. After careful consideration of such offer, we declined to pursue it in a letter response dated June 1, 2015.
"However, consistent with our policy to consider all potential strategic opportunities that may benefit our company and our shareholders, we remain open to engaging in further discussions with Ctrip as well as with other strategic players in our sector."
The timetable outlined above seems to suggest that Ctrip had two offers in the market at the same time. Ctrip announced its takeover of eLong on 22 May; Qunar's "no thanks" letter came after that, so presumably Ctrip was planning to takeover both eLong and Qunar.
If that is the case, does Ctrip now find itself with a massive Qunar-sized hole in its plans?
Qunar did however talk in general terms about the impact of the eLong/Ctrip deal on the hyper-competitive landscape:
"On the supply side, hotels are actively looking for more than one distribution channel to sell their rooms. Since the deal, hotels are coming to us more aggressively, providing us with a tighter relationship, more volume and more exclusive product.
"We have seen this since the announcement of the deal.
"For users, there will be a better experience - more back-end integration, guaranteed allotment, unique product.
"We expect to see a material hotel volume acceleration in Q2 and we are seeing some of this since the deal was announced."
Again, this raises important questions - to what extent, if any, did this uplift in interest from hotels contribute to Qunar's decision to say no to Ctrip? Would there have been a different outcome if Ctrip has made sequential rather than simultaneous offers?
Next, the $500 million investment led by Silver Lake should be seen in the context of recent funding frenzy engulfing the Chinese online travel sector - last month Tuniu raised $500m led by JD.com, while Ctrip, as well as buying Expedia's stake in eLong, picked up another $250 million from Priceline.
Again this raises a question - was that $250 million from Priceline earmarked for the Qunar takeover, which was still on the table at the time?
Silver Lake contributed $330 million of Qunar's latest injection. Oddly, while the official announcement talked about "another investor contributing $170 million" without naming names, management revealed on the earnings call who the investor was - Hillhouse Capital.
The cash will be used to invest in technology, enhance its supply chain and expand the number of mobile users.
Qunar's drive to instigate an offline-to-mobile transition in China is explained in great detail on the call. Qunar talks up the retentive qualities of mobile, with 40-45% of its first time users coming back within twelve months to make another purchase.
This is why Qunar is so focused on attracting new users and promoting its app via incentives and discounts. And it is the app rather than mobile web where the action is, with 70/80% of its mobile business coming through the app.
New user acquisition also explains its relatively high offline marketing spend, looking to attracting new users in second and third cities through incentives.
It also said that most of the first time users are in their mid-to-late 20s, and as these customers mature they spend more. It suggested that this was one of the reasons why its premium product range - 4/5star hotels, international packages, first - and business-class air tickets - performed strongly in the quarter.
Mobile revenues in the first three months of 2015 came in at RMB398.5 million ($64.3 million) , a 275% year-on-year increase. Mobile accounts for nearly 60% of total revenues. By volume, 48% of flights and 77% of room night were booked through mobile.
The mobile piece is also relevant when looking at the new Baidu deal. The old one, as discussed on previous calls, was signed when PCs were the dominant channel. Baidu guaranteed Qunar a certain level of traffic from its sites, for which Qunar paid a referral fee and shared revenues.
However, as more traffic shifted to mobile, PC-based traffic from Baidu became less important to Qunar.
The new deal takes the relationship firmly into the mobile age. Qunar becomes the exclusive hotel partner for Baidu Maps, with its hotel inventory bookable on the Baidu Map platform. Baidu Maps has around 240 million active monthly users.
And remember that Baidu announced "a strategic investment and co-operation deal" with Uber," with Baidu Maps at the centre of the relationship.
Among these three developments, the Q1s should not be overlooked. Headline figures show total revenues of RMB 671.1 million ($108.3 million), a 100% year-on-year increase.
Flight and flight related revenues came in a RMB475.3 million ($73.8 million), nearly 100% up year on year. Accommodation revenues of RMB 128.3 million ($20.7 million) represent a 107% increase on the same quarter last year.
However, the business remains firmly in the red - its operating loss was RMB411.2 million ($66.3 million), higher than the same period last year but less than the RMB666.6 million deficit reported in the previous quarter.
Nonetheless, Qunar said that it "expects to turn profitable on a quarterly non-GAAP EBIT basis, by the end 2016" and that margins in the long-term will stabilise at around 30%.
"China is still very early in terms of the travel sector. The intense level of competition is only natural because the prize is so big. If you look at other markets, backtrack a dozen years or so, it's the same, when the market was early it was still fragmented."