Tencent Launches $5 Billion Bond Program

Chinese Internet company Tencent Holdings Ltd. said Thursday it has set up a program that enables it to issue bonds worth up to $5 billion over the next year, at a time when it has been going on an acquisition binge to compete with archrival Alibaba Group Holdings Ltd.

While it is unclear when and how much debt that Tencent might issue, the program gives it the capacity and flexibility to raise more funds. In China's vast Internet sector, the battle for supremacy between Tencent and Alibaba is intensifying as both companies spend more to launch new services or buy other domestic businesses. Tencent, whose main businesses are online games and social networks, and Alibaba, which runs China's most popular shopping sites, are both broadening their operations through alliances and acquisitions.

Tencent said in a statement that the proceeds from any bonds issued out of the program--known as a medium-term note program--will be used for "general corporate purposes," without giving details. Tencent said it has hired Deutsche Bank to set up the program.

Over the past seven months, the company has struck several deals worth over $1 billion in total. In March alone, the company announced three deals: a $215 million agreement to buy a 15% stake in Chinese e-commerce company JD.com., a $180 million deal to buy 15% of online real-estate-services firm Leju Holdings Ltd., and a $500 million deal to buy 28% of Korean mobile games firm CJ Games Corp.

Alibaba, meanwhile, has also been on a buying spree. Since the start of last year, the company has spent more than $3.5 billion on seven acquisitions, including AutoNavi Holdings Ltd., an online mapmaker, and a minority stake in Sina Corp.'s Twitter-like Weibo microblog business. In May 2013, Alibaba raised $8 billion in a syndicated bank loan. While it used part of that loan to refinance its existing debt, the remaining portion has helped it finance its expansion.

Tencent issued its first U.S. dollar bond worth $600 million in December 2011 and issued another $600 million bond in August 2012.

Write to Fiona Law at [e-mail] and Juro Osawa at [e-mail]

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