(Yicai Global) April 12 -- The Chinese unit of WeWork Companies Inc., the world’s biggest co-working space operator, will take over local rival Shanghai Naked Hub Enterprise Management Consulting Co. in a deal reportedly worth USD400 million.
New York-based WeWork, which rents trendy workspaces to startups and freelancers, will gain 10,000 new members across 24 locations mostly in China and Southeast Asia through the deal, it said in a statement today. WeWork has aimed to expand its presence in China after entering the market in 2016.
China’s co-working space sector is enjoying a boom period driven by the influx of millennials entering the workforce and preferential government policies. The market reached CNY4.3 billion (USD650 million) in 2016 and is expected to hit CNY9.4 billion next year, a report from consultancy iResearch states. The market remains cutthroat with major cities home to multiple entrenched operators such as home-grown Beijing unicorn U-Commune and Shanghai-based People Squared, China’s first partner for Alphabet Inc.’s Google for Entrepreneurs program.
“In Naked Hub, we have found an equal who shares our thinking about the importance of space, community, design, culture, and technology,” said WeWork CEO Adam Neumann. “Together, I believe we will have a profound impact in helping businesses across China grow, scale, and succeed.”
The billionaire entrepreneur referred to the deal as a merger rather than an acquisition. Consolidation is expected to take six months, a source close to the deal told Yicai Global. Naked Hub will operate independently at least for this year, the insider said, adding that current staff will receive WeWork’s training for new employees.
As co-working brands establish clear positions in the market, leading players, especially those with considerable financial clout and distinctive product offerings will look to strengthen themselves, said Yintao Feng, founder and CEO of Shanghai-based firm Mixpace. The sector is ripe for consolidation that could result in only four or five dominant brands left standing, he said.
Editor: Mevlut Katik