SoftBank to invest up to US$5b in Ele.me?

TOKYO: SoftBank Group Corp’s monster Vision Fund plans to lead an investment of US$3 billion (RM12.22 billion) to US$5 billion into Ele.me, the food delivery giant owned by Alibaba Group Holding Ltd, said people familiar with the matter.

The near-US$100 billion fund led by Masayoshi Son was heading up discussions with potential investors, including venture capital firms, said the people.

As part of the agreement, Alibaba intended to merge Ele.me with in-house arm Koubei, which focused on connecting restaurants to the Internet, they added.

Negotiations were ongoing and the terms could still change, they said.

The financing presents a muchneeded capital infusion for Ele.me, which is burning enormous amounts of cash in a competition with Meituan Dianping, the Chinese Internet giant backed by Alibaba-foe Tencent Holdings Ltd.

While it’s unclear how big a stake is available in Ele.me, which was valued at US$9.5 billion in Alibaba’s April acquisition, investors get a piece of a company that’s said to be a candidate for an initial public offering.

Ele.me and Meituan are incurring massive losses as they offer heavy discounts on food orders to lure users in a bitter fight for market share. While that lowers prices for customers, both companies have to maintain payments to the armies of drivers on motorcycles that do their deliveries.

The market for on-demand services in China is surging as people increasingly turn to their smartphones to order meals, schedule beauty treatments and hire domestic helpers. It’s also strategically important for Alibaba and Tencent as a means of promoting their respective payment services.

Alibaba bought out the rest of Ele.me this year but the startup is run somewhat independently.

Meituan, the world’s thirdmost valuable tech startup according to CB Insights, posted a net loss of 19 billion yuan (RM11.4 billion) last year although revenue more than doubled to 33.9 billion yuan.

Tencent owns more than a fifth of the company.