Softbank Group Corp’s monster Vision Fund plans to lead an investment of US$3 billion to US$5 billion into Ele.me (餓了麼), the food delivery giant owned by Alibaba Group Holding Ltd (阿里巴巴), people familiar with the matter said.
The nearly US$100 billion fund led by Masayoshi Son is heading up discussions with potential investors, including venture capital firms, said the people, who asked not to be identified discussing a private deal.
As part of the agreement, Alibaba intends to merge Ele.me with in-house arm Koubei (口碑), which focuses on connecting restaurants to the Internet, the people said.
Negotiations are ongoing and the terms could still change, they added.
The financing presents a much-needed capital infusion for Ele.me, which is burning enormous amounts of cash in a competition with Meituan Dianping (美團點評), the Chinese Internet giant backed by Alibaba rival Tencent Holdings Ltd (騰訊).
While it was unclear how big a stake is available in Ele.me, which was valued at US$9.5 billion in Alibaba’s April acquisition, investors get a piece of a company that has been said to be a candidate for an initial public offering.
Ele.me and Meituan are incurring massive losses as they offer heavy discounts on food orders to lure users in a bitter fight for market share. While that lowers prices for customers, both companies have to maintain payments to the armies of drivers on motorcycles that do their deliveries.
The market for on-demand services in China is surging as people increasingly turn to their smartphones to order meals, schedule beauty treatments and hire domestic helpers. It is also strategically important for Alibaba and Tencent as a means of promoting their respective payment services.
Reuters first reported the targeted fundraising amount and merger plan.
Alibaba declined to comment on behalf of Ele.me.
A Softbank spokesman declined to comment.
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