Firms backed by China's Alibaba and Tencent merge

Alibaba is the world's largest e-commerce company

Two firms backed by Chinese internet rivals Alibaba and Tencent are merging to create a new company that provides a wide range of online services.

Meituan.com, which is partially owned by Alibaba, and Dianping Holdings, which is backed by rival Tencent, will join together to offer everything from movie purchases to food delivery.

The companies operate websites similar to group-buying provider Groupon.com.

Reports suggest the merger will create a company valued at $20bn (£13bn).

Alibaba and Tencent are rivals in China's highly competitive internet space and the two start-ups are described as China's largest.

Their merger would create the country's biggest online-to-offline service providers - companies that draw online consumers to physical stores.

"Both companies will join forces to enhance their respective market position and growth prospects," they said in a joint statement.

The chief executive of Dianping, Zhang Tao, and the chief executive of Meituan, Wang Xing, will be co-chairmen and chief executives of the new company.

The two start-ups will also maintain their respective brands and operate their businesses independently, they said.

Web giants Alibaba and Tencent have invested billions into the companies that connect users to local services.

The number of online shoppers in the world's second largest economy grew by 13% to 374 million in the 12 months to June, according to the China Internet Network Information Center.