Alibaba will be further expanding its stake in China's food and local services delivery market as the company is set to gain full control of Ele.me in a deal that puts the startup's value at $9.5 billion. It remains unclear, however, how much Alibaba will pay for the acquisition.
The e-commerce giant already invested $900 million in Ele.me two years ago, with its affiliate Ant Small and Micro Financial Services Group providing the rest of the money for a total investment of $1.25 billion. Currently, Alibaba and its finance-focused affiliate hold approximately 43% of Ele.me, though Alibaba will acquire all of the remaining outstanding shares of the startup once the transaction is completed.
As part of the deal, Ele.me will retain its brand while Alibaba will provide full technical support for the digital aspect of the operation. Additionally, Zhang Xuhao, the founder of Ele.me, will serve as chairman of the startup and as a special adviser to Alibaba’s CEO on New Retail strategy. Meanwhile, Wang Lei, vice president of Alibaba Group, will assume the role of CEO at Ele.me.
The goal of the acquisition is two-pronged. Alibaba wants to fully incorporate Ele.me's platform into its ecosystem and broaden the scope of the e-commerce company's strategy for local services called "New Retail," which is meant to seamlessly combine the online and offline shopping experiences of consumers with the use of technology.
Alibaba Group Chief Executive Officer Daniel Zhang also acknowledged Ele.me’s dominance in the online food delivery and local services market and said:
Looking forward, Ele.me can leverage Alibaba’s infrastructure in commerce and find new synergies with Alibaba’s diverse businesses to add further momentum to the New Retail Initiative.
Alibaba noted a market study from Analysys, which reported that the food-delivery market hit $10.7 billion in the fourth quarter of 2017, up 16.2 percent from the previous quarter.
Ele.me's addition to Alibaba’s ecosystem is also expected to complement Koubei, the company's affiliated local services platform that provides an integrated experience for consumers both online and offline.