Does A Tencent-LinkedIn Merger Make Sense?

LinkedIn Corp LNKD continues to push into the Chinese market, which is prompting at least one Asian-based source to speculate the company could be an acquisition target from a China-based buyer.
After entering the Chinese market in 2014, the company is now aiming to boast a network of 140 million professionals in the country. By comparison, China's largest domestic professional site Tianji has just over 20 million users.

On Friday, Asian Sweeper commented on why Tencent Unsp ADR TCEHY acquiring LinkedIn represents a key strategic move.

According to the publication, Tencent doesn't have much exposure to the professional networking space beyond its already existing partnership with LinkedIn. The company has "expressed interest" in entering the space to acquire traffic and better compete against rival Alibaba Group Holding Ltd BABA not only in China, but in the U.S. and Europe.

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As such, the publication suggested that LinkedIn represents a buying opportunity for Tencent, considering it already owns three of the world's five biggest social networks (QQ, Qzone, WeChat) and can't beat Alibaba in the e-commerce space.

"It wouldn't be optimal for Tencent to compete with Alibaba in e-commerce where the latter has a major edge," Asian Sweeper argued. "Rather, Tencent is a social powerhouse in China and could use its current social portfolio to integrate LinkedIn's professional platform."

If Tencent were to make a move for LinkedIn, the company would need to do so "sooner rather than later."

Bottom line, Tencent can't pursue an acquisition of Twitter Inc TWTR, Tumblr and Skype for "obvious reasons" but LinkedIn would represent an ideal match given its already "substantial" presence in China.

What's Wall Street Think?

In an interview with Benzinga, Axiom Senior Analyst Victor Anthony shared his thoughts on the rumor.

Anthony, who covers the stock, said he was "not sure of Tencent's ambitions outside of China," but added, "with Alibaba Group Holding Ltd BABA getting aggressive I wouldn't be surprised."

Of note, this is just the latest social media rumor. Speculation of a Twitter-Google Inc GOOG GOOGL tie up circulated earlier this month.

"Tough to follow these rumors, plenty of them in the space and some do pan out," Anthony added.