Chinese e-commerce, retail, Internet, AI and technology conglomerate Alibaba announced earlier today that it would buy out the outstanding shares of Ele.me, a Chinese food delivery service startup, in a deal that pegs the value of Ele.me at $9.5 billion. Alibaba and its affiliate Ant Small and Micro Financial Services Group already own about 43 percent of Ele.me, which was founded in 2008 by Jia Kang and Xuhao Zhang and lets customers communicate with restaurants and order meals from them through a website. The company has previously raised over $3.3 billion in funding across eight rounds between January 2011 and June 2017, and its last round of funding valued the company at about $6 billion.
Ele.me is one of the major players in a growing Chinese e-commerce market that is attracting a lot of new players. In August, the platform acquired the delivery services platform from major rival Baidu Inc. and counts the likes of JD.com, Tencent Holdings, and Sequoia Capital as prior investors as well. Xuhao Zhang, Co-founder of Ele.me, said in a statement, “This acquisition shows that we have built Ele.me into one of China’s most valuable internet businesses...We share the same strategic vision (as Alibaba) that New Retail has a bright future and being part of Alibaba’s ecosystem will take Ele.me’s growth to a new level.”
As part of the deal, Ele.me will continue to function as an independent brand under the Alibaba portfolio, along with its existing partners and merchants. Alibaba will combine the network and market presence of Ele.me with its New Retail strategy, providing support through access to infrastructure, product offerings, and technology. Xuhao will transition to Chairman of Ele.me and also act as Special Advisor to Daniel Zhang on Alibaba’s New Retail strategy; Wang Lei, Vice President of the Alibaba Group, will step into the CEO role at Ele.me.
Alibaba has invested heavily in expanding its e-commerce offerings in China in recent years, including new investments in delivery systems, mobile payments, and automated stores. The company faces tough competition, notably from rival Tencent Holdings and its portfolio firm Meituan Dianping. Meituan’s rapid growth in recent years has made it one of the most valuable startups in the world, and the company has plans to go public this year with a valuation of almost $60 billion, according to Bloomberg. As the competition ramps up, Alibaba is focused on making sure it makes the most of the opportunities presented by the vibrant new market, even as it expands into the larger Southeast Asian region – the company announced in March this year that it would be investing an additional $2.6 billion in digital marketplace Lazada, a major player in the Southeast Asia e-commerce market.