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Alibaba set to merge food delivery units as it looks to ramp up China competition with Meituan-Dianping

Merging both units will help Alibaba better position itself in its battle for market share with Meituan-Dianping in China

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Drivers of the food delivery service Ele.me prepare to start their morning shift. Photo: Reuters

Alibaba Group Holding will merge its food delivery units and raise funds for the combined group, as it looks to ramp up its fight against rival Meituan-Dianping for the lion’s share of China's multibillion-dollar on-demand services industry, according to a report by Reuters. 

Alibaba's food delivery platform Ele.me, which it acquired for US$9.5 billion in April, will merge with its food and lifestyle services arm Koubei, Reuters reported on Tuesday, citing anonymous sources. Hangzhou-based Alibaba is looking to raise between US$3 billion and US$5 billion for the combined entity, which could be valued at as much as US$25 billion.

Japanese conglomerate SoftBank Group Corp’s US$92 billion Vision Fund will lead the investment in the merged Ele.me and Koubei operation, according to a Bloomberg report that also cited sources.

An Alibaba spokeswoman declined to comment on market speculation.

Merging both units will help Alibaba better position itself in its battle with Meituan-Dianping. The companies are running neck-and-neck in the on-demand market in China, providing everything from food delivery to restaurant reviews and even massage services. Meituan-Dianping is currently China's most-funded e-commerce start-up, drawing over US$8 billion in funding, according to the China Internet Report co-authored by the Post, Abacus News and 500 Startups.
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