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By Bloomberg

China’s two largest taxi-hailing applications, backed separately by Alibaba Group Holding Ltd. and Tencent Holdings Ltd., are in talks to merge, according to people familiar with the matter.

Hangzhou Kuaidi Technology Co., with investors including Alibaba and SoftBank Corp., may announce a combination with Tencent-backed Didi Taxi after next week’s Lunar New Year holiday, the people said, asking not to be identified because the talks are private. Tencent would be the largest shareholder in the combined company, which would have a valuation of about $6 billion, the people said.

The potential deal comes less than two months after Baidu Inc. agreed to buy a stake in Uber Technologies Inc. With more than 500 million people in China using mobile phones to access the Web, the nation’s three largest Internet companies are stepping up the competition to offer services and win customers.

Canny Lo, a spokeswoman for Tencent, and Zhou Lili, a spokeswoman for Didi Taxi, didn’t respond to e-mail and text messages. Li Min, a spokesman for Kuaidi, declined to comment. Alibaba declined to comment in an e-mailed statement.

Talks between Kuaidi and Didi were reported earlier by the Wall Street Journal.

Kuaidi last month raised $600 million from investors including SoftBank, Alibaba and Tiger Global Management. The funding gave it a valuation of more than $2 billion, a person familiar with the matter said at the time.

In July, Kuaidi said it preferred to pursue an initial public offering rather than be taken over. The company said it had more than 200 million users in 358 cities.

Last year, Kuaidi introduced Yi Hao Zhuan Che, a luxury car-booking service that now covers 56 cities in China and competes with Uber.

Chinese regulators have cracked down on car-hailing apps, including Uber. The Ministry of Transportation last month banned private vehicles from acting like taxis while also endorsing services using licensed vehicles and drivers such as those provided by car-rental firms.