Tencent Offers to Buy eLong

Chinese online travel company eLong Inc. has received a takeover offer from its shareholder Tencent Holdings Ltd., the latest move in a sector that has seen an abundance of deal activity.

Tencent is offering $18 per American depositary share in a preliminary, nonbinding proposal dated Monday. That provides a 24% premium to Friday's closing price and a 27% premium to Monday's price. In after-hours trading Monday, eLong's ADSs rose 10% to $15.65.

ELong's board will form a special committee to consider the offer.

Tencent's operations include the messaging app WeChat and the social network Qzone.

ELong also said it swung to a second-quarter loss as revenue declined. Hotel revenue was lower in part due to an "aggressive" coupon program, and transportation revenue fell as major Chinese airlines lowered their base air commission rates.

In May, Expedia Inc. sold its majority stake in eLong for $671 million to a group of buyers including Ctrip.com International Ltd., Keystone Lodging Holdings Ltd., Plateno Group Ltd. and Luxuriant Holdings Ltd. Expedia's involvement with eLong dated back to 2005, when Expedia's then-parent IAC/InterActiveCorp. took a controlling interest in the Chinese company.

In late May, Priceline Group Inc. invested an additional $250 million in Ctrip, after a $500 million bet made last year. Ctrip made an unsolicited bid for Qunar Cayman Islands Ltd., which rejected the offer and announced a $500 million investment led by private-equity firm Silver Lake in early June.

China's booming online travel business has become increasingly competitive as Alibaba Group Holding Ltd. and other Internet companies look to tap the surging ranks of Chinese tourists. In October, Alibaba unveiled a travel marketplace branded Alitrip, a revamp of its Taobao Travel arm.

Write to Josh Beckerman at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires