MEITUAN is exploring a potential acquisition of Delivery Hero’s business in South-east Asia as the Chinese delivery giant looks to diversify beyond its domestic market, according to sources familiar with the matter.

Meituan has held talks with Delivery Hero about buying South-east Asian operations that run under the Foodpanda brand, the sources said, asking not to be identified as the information is private.

There’s no certainty the discussions will lead to a transaction, and other bidders could emerge. A representative for Meituan did not respond to requests for comment, while a spokesperson for Delivery Hero declined to comment. Delivery Hero shares rose 0.5 per cent to 31.37 euros at 4.13 pm in Frankfurt.

Founded in 2010, Meituan has become the largest food delivery platform in China. It operates in more than 2,800 cities and counties in the world’s second-largest economy. The tech giant in May started KeeTa, a new food delivery brand, in Hong Kong.

Meituan’s expansion into South-east Asia would present a challenge for Grab Holdings, the ride-sharing, food-delivery and fintech company that has quickly become a leader in the region. The Singapore-based company just reached profitability on an adjusted basis, and Meituan would be a much bigger competitor than Grab’s current regional rivals.

In the quarter ended in June, Meituan posted its fastest pace of revenue since 2021 after dining and travel bounced back from Covid-Zero depths despite broader consumer spending malaise. It’s expanding into adjacent areas from grocery retailing to group buying. In March, the food delivery giant abandoned its ride-hailing service to cut down on costs. And it’s investing heavily in live-streaming services to fend off rivals such as ByteDance’s Douyin.

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Shares of Meituan have fallen about 36 per cent this year in Hong Kong, giving the company a market value of about US$89 billion. The company’s American depositary receipts dropped 3.7 per cent at 10.09 am in New York.

Delivery Hero said in September it’s in talks to sell part of its operation in South-east Asia, where growth has stagnated since Covid-19 lockdowns eased. It’s in negotiations to divest the Foodpanda brand in Singapore, Malaysia, Philippines, Thailand, Cambodia, Myanmar and Laos.

The business in Asia is holding growth back even though it’s the company’s largest and the most profitable segment, chief executive officer Niklas Oestberg said. Gross merchandise value in Asia declined 6.2 per cent in the third quarter from a year earlier to 6.39 billion euros (S$9.34 billion). BLOOMBERG