Baidu eyes sale of Waimai’s food de­liv­ery di­vi­sion, source says

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG and CHINA DAILY

Baidu Inc is plan­ning to sell its loss-mak­ing food de­liv­ery unit, Baidu Waimai, 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 is less than half the $2.5 bil­lion it was given dur­ing its last round of fundrais­ing, said the source who did not want to be iden­ti­fied.

Selling Waimai would put an end to heavy cash losses for Baidu, China’s big­gest search en­gine, as it strug­gles in the com­pet­i­tive on-de­mand ser­vices mar­ket and shifts its bets to ar­ti­fi­cial in­tel­li­gence, the source added.

A deal would shore up Ele.me’s lead in a fiercely com­pet­i­tive in­dus­try that de­pends on scale, while bring­ing mil­lions of users onto Alibaba’s e-com­merce and pay­ments net­work. Ele.me and Baidu de­clined to com­ment on queries about a po­ten­tial sale, which fi­nan­cial mag­a­zine Cai­jing re­ported ear­lier.

Cai­jing said Baidu Waimai and Ele.me have reached a ver­bal agree­ment, and if ev­ery­thing goes smoothly, the deal will be an­nounced within two or three weeks.

The de­vel­op­ment comes two months af­ter me­dia re­ported that Baidu Waimai was talk­ing with lead­ing de­liv­ery com­pany SF Hold­ing Ltd. How­ever, the two sides could not reach a con­sen­sus on price and con­di­tions, so ne­go­ti­a­tions broke down.

Once a key com­po­nent of Baidu’s so-called on­line-toof­fline strat­egy, Waimai ran up against foes backed by Alibaba and Ten­cent Hold­ings Ltd. The deep-pock­eted in­ter­net giants, who both have mar­ket val­ues of at least $370 bil­lion, spent bil­lions on the sec­tor to boost their own pop­u­lar pay­ments plat­forms, even as more peo­ple turn to smart­phones to or­der take­out and hire clean­ers.

“Its strat­egy in the on­lineto-off­line busi­ness has been less ag­gres­sive than be­fore and its cur­rent key fo­cus is on the AI-re­lated busi­ness,” said Marie Sun, a Shen­zhen-based an­a­lyst at Morn­ingstar In­vest­ment Ser­vice.

“In the com­ing times, I don’t think Baidu will have ag­gres­sive spend­ing on this dy­ing busi­ness.”

Baidu has more than one on­line-to-off­line op­er­a­tion. Waimai fo­cuses on food de­liv­ery but the search com­pany also runs Nuomi, which han­dles ser­vices in­clud­ing movie tick­et­ing and Groupon-like bar­gains. Sales in the on-de­mand ser­vices sec­tor are ex­pected to reach $230 bil­lion in 2018, ac­cord­ing to in­ter­net con­sul­tant iRe­search.

Yang Xu, an an­a­lyst at Beijing-based in­ter­net con­sul­tancy Analysys, agreed the on­line food de­liv­ery sec­tor had not been Baidu’s core busi­ness since the sec­ond half of last year — as Baidu CEO Robin Li put more em­pha­sis on AI.

Yang said the com­pe­ti­tion in the do­mes­tic food de­liv­ery sec­tor would be more in­tense as two giants, Ele.me and the Ten­cent-backed startup Meituan Dian­ping, dom­i­nate the mar­ket.

An Alibaba ex­ec­u­tive told Cai­jing that Alibaba plans to take full con­trol of Ele.me, and ne­go­ti­a­tions are cur­rently un­der­way. In 2015, Alibaba in­vested $1.25 bil­lion in Ele.me, be­com­ing its largest share­holder with a 27.7 per­cent stake.

Its strat­egy in the on­line-to-off­line busi­ness has been less ag­gres­sive than be­fore and its cur­rent key fo­cus is on the AI-re­lated busi­ness.” Marie Sun, a Shen­zhen-based an­a­lyst at Morn­ingstar In­vest­ment Ser­vice

A QING / FOR CHINA DAILY

A Baidu Waimai de­liv­ery worker re­ceives on­line food or­ders on his phone in a street in Beijing.

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