Alibaba Group Holding Ltd (阿里巴巴) plans to buy out Baidu Inc (百度) and other investors in Chinese start-up Ele.me (餓了麼) to shore up its delivery network, a person familiar with the matter said, placing its biggest bet yet in online food and local services.
An acquisition would hand Alibaba the biggest chunk of the Chinese online food delivery market and pit it directly against Meituan Dianping (美團點評), backed by Tencent Holdings Ltd (騰訊).
Ele.me — which means “hungry yet?” — runs an army of delivery people on motorbikes across China that could enhance Alibaba’s last-mile ability to get parcels to customers’ doorsteps and complement its Koubei (口碑) neighborhood services business.
The e-commerce giant, which owned 23 percent of Ele.me as of May last year, plans to buy the stock from existing investors, including Baidu, said the person, who requested not to be named because the matter is private.
It was unclear how much Alibaba agreed to pay, but Ele.me was reportedly valued at between US$5.5 billion and US$6 billion in a round of fundraising in May last year.
The start-up then bought Baidu’s delivery business at a US$500 million valuation in August last year, a person familiar with the matter said at the time.
Alibaba, Ele.me and Baidu declined to comment.
If the deal goes through, Alibaba and Meituan would dominate a Chinese food delivery market that Analysys estimated reached 67.7 billion yuan (US$10.7 billion) in the fourth quarter of last year, an increase of 16.2 percent from the previous three months.
For Baidu, it would be another exit from a business considered peripheral to its core operations in search and artificial intelligence.
Alibaba has taken steps to shore up its logistics in recent months, taking over long-time delivery affiliate Cainiao (菜鳥) and drawing up plans to invest in warehouses.
However, unlike e-commerce rival JD.com Inc (京東), which builds and runs its own fleet of delivery people, Alibaba’s last-mile capabilities have been confined mainly to third-party partners.
Its investments in so-called “new retail,” such as brick-and-mortar stores and grocery chain Hema (盒馬), have also helped shore up the network by providing delivery points and warehousing for parcels.
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