Leading ecommerce giant, Alibaba Group said it plans to merge its food delivery units and raise funds for the combined business, a move that aimed at intensifying battle with Tencent-backed Meituan Dianping for dominance of China’s booming on-demand services market.
Reuters reported that Alibaba units to be merged include food delivery platform Ele.me and food, lifestyle services firm Koubei, while also looking to raise between $3 billion and $5 billion for the combined entity.
The Hong Kong-based Alibaba task force is working on the merger and fundraising for the combined entity,
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 Reuters.
Other potential investors include Chinese private equity firm Primavera Capital Group, while the new unit would also include Alibaba’s Hema Fresh, a chain of cashless supermarkets offering fresh produce and food delivery.
Business a.m. gathered that Meituan Dianping is China’s largest group-buying and restaurant reviews service. The company backed by WeChat-operator Tencent Holdings Limited is the world’s third biggest unicorn with a value of $30bn.
Meituan’s closest rival, Ele.me, is owned by e-commerce titan Alibaba Group, parent company of the South China Morning Post. The start-up said in a separate statement it employed as many as 200 people to guard against data theft.