Some investors oppose the strategy and would prefer the company to tie up with local home-sharing leader Tujia.
Airbnb Inc.’s founders were moments away from merging their China business with local competitor Tujia in January 2017. Executives and investors spent hours hashing out a deal. Preliminary term sheets were drawn up. Then in the final hour of negotiations, Airbnb pulled out.
Investors had hoped a truce would stop the companies from hemorrhaging money in the fight for control of China’s blazing home-sharing industry. But rather than take a page from Uber, which agreed to cede China to rival Didi in exchange for an equity stake, Airbnb Chief Executive Officer Brian Chesky had a change of heart and decided to forge ahead in China alone.
Sixteen months later, the decision still rankles investors and has further emboldened Chinese rivals, according to people close to both companies. Tujia remains keen to cut a deal—although both sides deny formal talks—and says it's simply waiting for Airbnb executives to accept reality. “We would love to issue shares in Tujia in exchange for Airbnb’s China operations,” says Tujia Chief Financial Officer Warren Wang. Until Airbnb is ready, “we will prove ourselves and show our muscle,” he said. “If Airbnb needs more time to understand that they or any other foreign tech companies just can’t do that well in China without a local partner, once we show them they’ll sit down and talk about a deal.”
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