Ele.me swallows up Baidu Waimai

Ele.me, one of the largest players in China’s food delivery service sector, has officially announced the purchase of its rival Baidu Waimai, the food delivery unit of major internet search engine Baidu Inc — a move that’s expected to shore up Ele.me’s lead in a fiercely competitive industry.

As part of the deal, Baidu Waimai will continue to operate as an independent entity, and its operations team will remain unchanged, Ele.me said a statement. However, the financial details of the deal have not been disclosed.

Ele.me will input more capital and resources to support Baidu Waimai, which has been aiming its services at the high-end market, especially white-collar employees, to expand its logistics system and build a high-quality food delivery platform, said the statement.

The fast-growing startup Ele.me is backed by Alibaba Group Holding Ltd and its financial service affiliate Ant Financial, and received $1 billion in funding from Alibaba in May, according to media reports. Alibaba also provided financial assistance for this deal.

The move could be another step in the heated battle between Alibaba and Tencent Holdings Ltd, which is backing another major food delivery company MeituanDianping, leaving them the only two major players in the food delivery sector in China.

Zhang Xuhao, founder and CEO of Ele.me, said in an open letter that Baidu Waimai has accumulated a rich user base and merchant resources, taking a lead in applying artificial intelligent technologies to food delivery. The merger will complement each other’s advantages and enhance the user experience.

Earlier this week, financial magazine Caijing reported that Ele.me will acquire Baidu Waimai as soon as this week. The deal is valued at around $500 million and is funded by a combination of cash and equity, said the source, who did not want to be identified.

Ele.me will also pay $300 million to be able to leverage Baidu’s other services to bring in more data, including Baidu Maps, Baidu Search, and group-buying service Baidu Nuomi, the report said.

“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,” said Yang Xu, an analyst at Beijing-based internet consultancy Analysys.

Yang said the competition in the domestic food delivery sector would be more intense as the two giants — Ele.me and Meituan Dianping — will dominate the market.