Airbnb is discussing terms and negotiation to acquire China's second-largest home accommodation service firm, people familiar with the matter have said as the Silicon Valley-based company continues its quest for global expansion.

If Airbnb's acquisition of Xiaozhu does go through, it would be largest deal in China's home-sharing service industry.  Xiaozhu is currently valued at $300 million.

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The acquisition deal would be beneficial for both companies. For Airbnb, the takeover deal would straight away take into the very heart of the Chinese lucrative market, which is the world's biggest outbound tourist market.

The deal can prove to be a watershed moment for the company in China, where it is still a minimal player in the market.  The firm currently has only 30 staff and boosts only 75,000 home listings in China, which is just a fraction of its 3 million global listings.

Acquiring a recognized home grown player would also help Airbnb in coping with regulatory challenges in China, where home sharing industry is still unregulated.

As for Xiaozhu, Airbnb deal would give a much needed breather in a time when the entire industry is going through a consolidation phase, with nearly half a dozen local home sharing companies either have shut their operation have been acquired by big competitors.

Xiaozhu's fund raising exercise took a major hit during this consolidation phase, as the company could only raise $65 million from investors earlier this month. However, the company does enjoy a strong standing in the market, with more than 100,000 listings and close to 10 million users on its site.

China's home sharing industry is currently dominated by Tujia, which boosts more than 400,000 listings and has raised a whopping $400 million from investors. The company off late has been on a acquisition drive, as it acquired Ctrip's vacation rental business and also acquired Mighty Talent - a holiday rental company.   

TagsAirbnb, Xiaozhu, Home Sharing Companies in China, Airbnb China, china