Alibaba Chews on Food Delivery Acquisition

Internet titan may buy the remaining stake in Ele.me, China’s biggest takeout delivery company.

By Chen Na

Alibaba is considering acquiring the remaining stake in food delivery giant Ele.me, according to a person familiar with the matter, as the e-commerce giant continues to expand its offline empire.

Alibaba, which has ventured into offline retail with its “new retail” strategy, is already a major stakeholder in Ele.me thanks to a $1.25 billion (7.89 billion yuan) investment in the business in 2016 alongside its affiliate Ant Financial. The duo increased their investment by another $400 million in April last year.

But Alibaba may extend their stake in the company further, said the source, who requested anonymity as they were not authorized to speak on the matter. The person told Sixth Tone that if the deal goes through, Alibaba will buy out Ele.me so it owns 100 percent of the company’s shares.

Sixth Tone’s sister publication The Paper reported earlier on Monday that Alibaba planned to buy out Ele.me with $9.5 billion in the next three months. Alibaba declined to comment on the deal and Ele.me did not respond to Sixth Tone’s interview requests.

For Alibaba, the deal could further increase its presence in the offline retail realm where the company aims to integrate online and offline shopping experience.

By acquiring Ele.me, Alibaba could mobilize the food delivery business’ logistics service to reach its consumers in a more timely and efficient fashion, the source said. In the past, Alibaba has replied on a limited number of warehouses stocked with goods to dispatch packages to buyers, which can be time-consuming and inefficient, but with Ele.me’s sprawling delivery network, Alibaba could beef up its performance in the “last mile” delivery, the person added.

If the Ele.me deal materializes, Alibaba and its rival Tencent — which backs food delivery company Meituan Dianping — will dominate China’s multi-billion dollar food delivery market. The industry has seen a sea change in the past few years. In 2015, startups Meituan and Dianping agreed to merge, and last year Shanghai-based Ele.me acquired Baidu Waimai, a runner-up previously owned by search engine Baidu.

Alibaba has already opened its first offline grocery store Hema in Shanghai where buyers can shop and pay with Ant Financial’s mobile payment service Alipay in-store, or order online through an app and have fresh food delivered in 30 minutes within a three-kilometer radius. Meanwhile, the company’s first brick-and-mortar megamall, More Mall, is slated to launch in April 2018 in the eastern city of Hangzhou.

Editor: Julia Hollingsworth.

(Header image: An Ele.me courier waits outside a restaurant in Wuhan, Hubei province, March 26, 2016. VCG)

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