SoftBank to lead US$3bil-plus round in Alibaba food delivery giant

HONG KONG: SoftBank Group Corp’s monster Vision Fund plans to lead an investment of US$3bil to US$5bil into Ele.me, the food delivery giant owned by Alibaba Group Holding Ltd, sources said.

The near-US$100bil fund led by Masayoshi Son is heading up 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. Negotiations are ongoing and the terms could still change, they said.

The financing presents a much-needed 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$9.5bil 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 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’s betting that robotics and artificial intelligence will trigger an upheaval of older industries.

On a more personal level, the Japanese investor was one of Alibaba’s earliest backers and remains a close friend of Alibaba-founder Jack Ma’s. The two sit on each other’s boards.