Ele.me is China’s largest food delivery service, and the company is about to get significantly larger soon.
As of last December Ele.me and Baidu Waimai were ranked as the first and third largest food delivery apps in China, with 36.5% and 17.3% market shares respectively. Meituan Waimai was ranked second with 33%, according to BigData-Research.
Now, Baidu (the Google, or some say Yahoo, of China) is in talks of selling its food delivery service Baidu Waimai to Ele.me for a stake in the company.
Baidu Waimai, the food delivery unit of Chinese search engine company Baidu Inc., is rumored to be in merger talks with Ele.me, a food ordering mobile app backed by Alibaba Group Holding Ltd. and Ant Financial.
Ele.me has raised in total $3.34 billion over 8 rounds. The latest round, in June of this year, saw Ele.me getting $1 billion from Alibaba at a $6 billion valuation.
There is a lot of talks and rumors surounding Ele.me right now:
Local media has also speculated that Alibaba is considering a full acquisition of Ele.me, citing insiders. […]
In May, Baidu Waimai and SF Express were reportedly in talks to jointly establish a new company to operate a food delivery business, expanding Baidu Waimai’s reach via SF Express’ vast logistics network.
The reason behind these consolidation talks is a fierce fight amonst the competing services, resulting in everyone taking losses. (It is similar to what happened to ride sharing in China, which eventually saw everyone joining forces in through a big merger in Didi Chuxing.)
Baidu Inc. is planning to sell its money-losing food delivery unit at a discounted price to a competitor backed by Alibaba Group Holding Ltd., a person familiar with the matter said.
The business could be sold to Ele.me at a valuation that’s less than half the $2.5 billion it fetched during its last round of fundraising, the person said, asking to not be identified discussing a private matter. Selling Waimai would put an end to heavy cash losses for Baidu, China’s biggest search engine, as it struggles in China’s competitive on-demand services market and shifts its bets to artificial intelligence, the person said.
For Alibaba, a larger, stronger Ele.me strengthens Alipay (against WeChat’s WePay) as well. Alibaba’s Alizila, from a year ago:
Under the agreement with Ele.me, Alibaba and Ant Financial will help consolidate the company’s leadership in the online food delivery business by leveraging the large user base for Mobile Taobao and Alipay digital wallet, Alibaba said in a statement. Meanwhile, Ele.me agreed to assume operation of Koubei’s online food delivery service.
As always with China, it will be interesting to watch how WeChat will grow in this sector. Bloomberg:
Tencent President Martin Lau said in May the company is “putting up quite a big initiative around the restaurant vertical” to propel its WeChat payments platform. After losing market share, the company is investing in the sector to be more competitive, he said.
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