China’s largest conglomerate Alibaba Group is planning to bring together and merge its food delivery units. The units that are getting merged are food delivery platform Ele.me and food and lifestyle services firm Koubei.
The purpose behind this move is to raise funds for the combined business and also to intensify the battle with Tencent-backed Meituan Dianping which is the company’s rival. With this merger, Alibaba Group is expecting to raise between $3 billion and $5 billion for the combined entity, and according to the sources, the entity could be valued at up to $25 billion.
“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.”
An Alibaba task force based in Hong Kong is working for the implementation of the merger and also the fundraising for the combined entity. The two Alibaba units and Meituan, are fighting for supremacy in China’s buoyant online-to-offline (O2O) market, in which apps link smartphone users with bricks-and-mortar businesses to provide local food delivery and other offerings.
Talking about the overall transactions, the value of O2O transactions in China increased to $146 billion by 72% last year. Meituan Dianping is looking to raise more than $4 billion when it reaches Hong Kong in the coming months. Last year the company worth was raised to $30 billion in a fundraising round.