Alibaba to Buy Food Delivery App Ele.me in $9.5B Deal

Online retailer Alibaba Group Holding Ltd. will be purchasing the remaining shares of food delivery platform Ele.me, giving it full control of the startup group and strengthening the e-commerce giant’s plan to broaden its physical retail presence.

Alibaba stated on Monday that buying all of Ele.me’s outstanding shares that it does not own will value the online delivery platform at $9.5 billion, including debt.

The Hangzhou-based company made its first investment in Ele.me in 2016. Along with its financial affiliate Ant Financial Services Group, the duo is currently the largest shareholder in the company, holding 43 percent of its shares.

Alibaba chief executive Daniel Zhang said Ele.me can help leverage Alibaba’s infrastructure in commerce and find new synergies with the company’s diverse businesses to bolster momentum further to its so-called, “New Retail” initiative.      

Alibaba aims to simplify the way users move and spend their money between brick-and-mortar stores, as well as with its businesses, such as Tmall.com and Taobao.

Ele.me founder and chief executive Zhang Xuhao stated that the acquisition serves as proof of Ele.me’s evolution as one of China’s most valuable internet businesses.

He added that they share the same strategic vision that New Retail has a bright future and being part of Alibaba’s ecosystem will take the food delivery app’s growth to a new level.

This is Alibaba’s latest in a series of investments and acquisitions to widen its presence, as part of its New Retail strategy to fuse e-commerce and offline retail.

Ele.me will continue to operate under its own brand after the takeover, but will integrate some functionality into the e-commerce group’s platform Koubei.

Following the acquisition, Ele.me will focus on bringing food to people’s houses, while Koubei will concentrate on attracting potential buyers for its products and services online, and have them get it or consume at physical stores or restaurants.

Xuhao will act as chairman of Ele.me as well as special advisor to Alibaba’s New Retail initiative, while Alibaba Vice President Wang Lei will become CEO.

Intensifying Battle between Alibaba and Tencent

The deal also helps Alibaba contend with internet firm Tencent Holdings Ltd. in China’s online food delivery market, which was valued at $32 billion in 2017 and is expected to expand by 18 percent to CN¥241 billion ($38 billion) this year.

Analyst Karen Chan said in February she expects an intensifying battle between Tencent and Alibaba for consumers’ digital wallet and data through a variety of retail-focused deals.

Tencent financially backs buying website and Ele.me’s main competitor, Meituan.com, which is known to resemble the US’ Groupon and Yelp, as well as the UK’s Deliveroo. Meituan is reportedly the world’s fourth most valuable startup, with a value of about $30 billion in its latest funding round in 2017.

Recent reports also suggested that it is considering an initial public offering (IPO) as early as this year at a valuation of at least $60 billion.      

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