Softbank to lead Alibaba funding
Plan to merge food delivery giant with in-house arm
SoftBank Group’s monster Vision Fund plans to lead an investment of $3bn-$5bn into Ele.me, the food delivery giant owned by Alibaba Group Holding.
SoftBank Group’s monster Vision Fund plans to lead an investment of $3bn-$5bn into Ele.me, the food delivery giant owned by Alibaba Group Holding, people familiar with the matter said.
The near-$100bn fund led by Masayoshi Son is heading discussions with potential investors including venture capital firms, said the people, who asked not to be identified discussing a private deal.
As part of the agreement, Alibaba intends to merge Ele.me with in-house arm Koubei, which focuses on connecting restaurants to the internet, the people added.
The financing presents a much needed capital infusion for Ele.me, which is burning enormous amounts of cash in competition with Meituan Dianping, the Chinese internet giant backed by Alibaba foe Tencent Holdings. While it is unclear how big a stake is available in Ele.me, which was valued at $9.5bn in Alibaba’s April acquisition, investors get a piece of a company said to be a candidate for an initial public offering.
Ele.me and Meituan are incurring large 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 delivery drivers.
The investment will come from the SoftBank Vision Fund, created to channel investments into some of the world’s most influential companies in an effort to stake out a dominant position in future technologies. Son is betting that robotics and artificial intelligence will trigger an upheaval of older industries.
The Japanese investor was one of Alibaba’s earliest backers and remains a close friend of Jack Ma, founder of Alibaba. The two sit on each other’s boards.
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. The market is also strategically important for Alibaba and Tencent as a means of promoting their respective payment services.
Alibaba declined to comment on behalf of Ele.me.
A SoftBank spokesman declined to comment.
Alibaba bought out the rest of Ele.me in 2018 but the startup is run somewhat independently. Meituan is heading for an initial public offering too.
THE JAPANESE INVESTOR … REMAINS A CLOSE FRIEND OF JACK MA. THE TWO SIT ON EACH OTHER’S BOARDS