China’s search engine major, Baidu Inc has raised more than $1.9 billion for its maiden spun off financial service division from TPG Capital Management LP and Carlyle Group LP as it seeks funding to take on established fintech firms in China.
The deal has come in the wake of a scenario where China’s government is tightening regulations on the loans market to rein in shadow banking and push banks to cut bad debt.
The investment will give Baidu a much-needed push to narrow down the leads that its contenders Tencent Holdings Ltd and Alibaba Group Holding Ltd. have grabbed in the financial landscape and will also help it expand beyond its core internet search business.
Robin Li, Baidu Chief Executive Officer said,
I feel proud to see the financial unit has graduated. This is another milestone for Baidu’s AI ecosystem after the listing of iQiyi.
Online Credit and wealth management platform, Baidu Wallet is owned and operated by Baidu’s Financial Services Group (Baidu FSG). It owns several small financial licenses such as a third-party payment license and a fund sales license.
Senior vice president at Baidu, Guang Zhu who will take over as chief executive of Du Xiaoman said in his statement on Sunday,
In the coming age of Fintech, Du Xiaoman will leverage the technological capabilities of Baidu AI to partner with financial institutions and provide technology-driven, trustworthy financial services to consumers in China.
Post the deal, Baidu will be left with roughly 42% stake in the unit and will be renamed as Du Xiaoman Financial that will work independently of Baidu. The rest of Du Xiaoman will be functional under the umbrella of Taikang Group and ABC International Holdings.
Baidu had reported an asset acquisition of $7.5 billion and liabilities of $6.6 billion in its earnings release and had also confirmed that there was no assurance of a sale.