Alibaba is in talks to acquire Ele.me in a deal that could value the online food delivery start-up at up to $9.5bn as China’s tech titans battle it out for dominance of the sector.
Alibaba and rival Tencent, each with an equity value of more than $500bn, have kicked off the year with aggressive buying sprees as they take each other on in ecommerce, payments, food delivery and other services.
While they began life with clearly defined turfs — Alibaba in ecommerce and Tencent in social media — both are evolving into tech conglomerates dominating many aspects of life, some of which have been ceded by traditional companies.
Food delivery is a case in point. China’s food delivery market was valued at Rmb204.6bn ($32.5bn) in 2017, according to the China Cuisine Association, an industry group.
外卖就是一个典型的例子。根据中国烹饪协会(China Cuisine Association)的数据，2017年中国在线外卖市场规模为2046亿元人民币（合325亿美元）。
Alibaba and its payments affiliate Ant Financial already own 40 per cent of Ele.me but are looking to buy the remaining 60 per cent from existing investors including Baidu, according to people familiar with the matter.
Recent Chinese media reports have suggested a deal could value the food delivery app at up to $9.5bn. Ele.me was valued at $5.5bn at its last funding round in August 2015, according to CBInsights.
Ele.me currently accounts for 48.8 per cent of the online food delivery market in China, closely followed by Meituan with 43.1 per cent, according to Analysys International.
Should the deal go through, Alibaba would become one of the country’s largest players in food delivery, rivalled only by online-to-offline services platform Meituan-Dianping, which is backed by Tencent. Meituan-Dianping was valued at $30bn in its latest funding round last year.
Alibaba and Baidu declined to comment on the negotiations.
Ele.me, a play on the Chinese phrase for “hungry yet?”, has emerged as one of the biggest food delivery players in China since it was founded in 2008.
For Baidu, the third of China’s big internet players, the deal would mean an exit from another services sector as it focuses on developing emerging technologies in artificial intelligence and autonomous driving.
While Ele.me fits into Alibaba’s strategy of “new retail”, fusing the online and offline worlds in retail and services, it is a step into a more capital-intensive arena.
Its ecommerce and logistics businesses are typically “asset-lite” — unlike Amazon or Chinese ecommerce rival JD.com Alibaba does not own big delivery fleets and chains of warehouses
Ele.me, which covers 2,000 cities in China, owns its network and its delivery couriers are on its payroll.
This stands to complement Alibaba’s latest retail efforts in other areas, such as its Hema supermarkets, which also do fast delivery in small areas — bolstering its “last mile” delivery capability.
Tencent and Alibaba have dominated the M&A calendar in the past three months, particularly in retail. Tencent has partnered with Chinese supermarket operator Yonghui and Carrefour of France and has invested in online retailer Vipshop, while most recently Alibaba has taken a stake in Easyhome, a furniture retailer, and Shiji, a data service company focusing on the hotel and travel industry.
Alibaba also has invested significantly in offline retail, started its Hema chain of grocery stores, and has shored up its holdings in Cainiao, the expansive logistics platform that began as a grocery delivery system in which it has a controlling stake.