Alibaba merging China food delivery units to counter Tencent-backed Meituan


By Kane WuJulie Zhu
  • TECH
  • Tuesday, 07 Aug 2018

The logo of Alibaba Group is seen at the company's headquarters in Hangzhou, Zhejiang province, China July 20, 2018. REUTERS/Aly Song/Files

Alibaba Group plans to merge its food delivery units and raise funds for the combined business, intensifying a battle with Tencent-backed Meituan Dianping for dominance of China's booming on-demand services market, said sources.

The Alibaba units to be merged include food delivery platform Ele.me and food and lifestyle services firm Koubei, the people said. Alibaba is looking to raise between US$3bil (RM12bil) and US$5bil (RM20bil) for the combined entity, said one source. The entity could be valued at up to US$25 (RM101bil), said another.

A Hong Kong-based Alibaba task force is working on the merger and fundraising for the combined entity, according to the sources.

Alibaba's units and Meituan, backed by social media and gaming giant Tencent Holdings, are fighting for supremacy in China's buoyant online-to-offline (O2O) market where apps link smartphone users with bricks-and-mortar businesses to provide local food delivery and other offerings.

"Alibaba and Meituan are the two main companies that can offer comprehensive O2O services," said Mo Jia, a Shanghai-based research analyst with technology consultancy Canalys. "Alibaba's three units are complementary to each other and it has strategic logic to merge them into one platform to compete with Meituan."

SoftBank Group Corp's Vision Fund is expected to be the lead investor in the fundraising, according to two sources. Other potential investors include Chinese private equity firm Primavera Capital Group, two other sources said.

One of the people said earlier the new unit would also include Alibaba's Hema Fresh, a chain of cashless supermarkets offering fresh produce and food delivery. The other sources said Hema was not part of the combined unit seeking funding.

Alibaba, which also handles media queries for Koubei and Hema, declined to comment. A spokesman for Ele.me denied the merger and fundraising plan. All the people declined to be named as the information is confidential.

A SoftBank spokeswoman declined to comment. Primavera did not immediately respond to a request for comment.

The value of O2O transactions in China jumped 72% last year to US$146 (RM595bil), according to Chinese research firm Analysys.

According to a June report by Chinese research firm iiMedia Research, Ele.me and Baidu Waimai, which Ele.me acquired a year ago, held a combined 55% of China's food delivery market in the first quarter compared with Meituan's 41%.

China's biggest ride-hailing firm Didi Chuxing also entered the fray in April launching its own food delivery service.

Meituan Dianping is expected to raise more than US$4bil (RM16bil) when it floats in Hong Kong in the coming months. Last year the company was valued at US$30bil (RM120bil) in a fundraising round.

In April, Alibaba bought the shares it did not already own in Ele.me in an all-cash deal that valued the startup at US$9.5bil (RM38.7bil). The e-commerce giant and its financial affiliate Ant Financial Services Group previously owned a 43 stake in the business, whose name roughly translates to “Hungry?".

Koubei, founded in 2015 as a 50-50 joint venture of Alibaba and Ant Financial, had a valuation of US$8bil (RM32bil) at the end of 2017, according to a list of unicorns published by a unit under China's Ministry of Science & Technology in March. Silver Lake, CDH Investments, Yunfeng Capital and Primavera Capital joined as investors in a January 2017 funding round.

Ant Financial declined to comment.

There are no publicly available numbers for Hema, which was founded two years ago as part of Alibaba's retail push and now operates more than 60 supermarkets in 13 cities in China, according to its website. — Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
   

Next In Tech News

Snap adds more users than Wall Street expected as improved app takes hold
London court allows Australia's Wright to serve bitcoin copyright claim
KKR-backed KnowBe4 valued at over $3.5 billion in strong Nasdaq debut
CD Projekt plans dividend after Cyberpunk 2077 sales neared 14 million last year
U.S. agency still 'gathering facts' on Texas Tesla crash
Exclusive-Two U.S. senators make new push to advance self-driving cars
Bosch sees growth in 2021, but warns on chips shortage
Facebook begins testing ads in Instagram Reels
Facebook to incorporate user feedback on News Feed arrangement
Young UK investors choose cryptocurrencies over stocks: survey

Stories You'll Enjoy


Vouchers