China’s Baidu Inc to sell a majority stake in its financial services business for about $1.9 billion

China’s Baidu Inc said it will sell a majority stake in its financial services business for about $1.9 billion to a consortium led by TPG Capital Management LP and Carlyle Group LP, as it seeks funding to take on established fintech firms in China.

The investment will give Baidu the heft it needs to narrow the lead that rivals Alibaba Group Holding Ltd and Tencent Holdings Ltd have taken in financial services, and help Baidu’s push to seek revenue streams outside its core internet search business, reports Reuters.

The deal comes at a time when China’s government is tightening regulations on the loans market to rein in shadow banking and push banks to cut bad debt.

Baidu’s Financial Services Group (Baidu FSG) runs payment system Baidu Wallet, an online credit service and an online wealth management platform. It owns several small financial licenses such as a third-party payment license and a fund sales license.

Baidu will be left with a roughly 42 percent stake in the unit, renamed Du Xiaoman Financial, which will operate independently of Baidu. The rest of Du Xiaoman will be owned by the consortium that includes Taikang Group and ABC International Holdings Ltd, Baidu said.

Guang Zhu, senior vice president at Baidu and general manager of the current financial services business, will become chief executive of Du Xiaoman, Baidu said in a statement late on Sunday.

“In the coming age of FinTech, Du Xiaoman will leverage the technological capabilities of Baidu AI to partner with financial institutions and provide technology-driven, trustworthy financial services to consumers in China,” Zhu said, referring to artificial intelligence.

Reuters reported in January that the Chinese search engine provider was seeking new investors for its wholly owned finance unit, in an up to $2 billion deal.

In a separate statement, TPG said, together with its co-investors, it would invest around $1 billion in the deal, which it expected to close in two to three months.

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