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As expected since February, Alibaba will buy all outstanding shares of Ele.me that it doesn’t already own. Best-known for food deliveries, Ele.me claims to be China’s biggest online delivery and local services platform. In an announcement, Alibaba said the deal values Ele.me at $9.5 billion. Alibaba, which first invested in Ele.me two years ago, and its affiliate Ant Small and Micro Financial Services Group currently hold about 43% of the company’s outstanding voting shares.
This is the latest in a string of investments and acquisitions by Alibaba to expand its physical retail presence as part of its so-called “new retail” strategy to combine e-commerce and offline retail. The company’s goal is to make it easier for users to move (and spend money) between brick-and-mortar stores and Alibaba businesses like Tmall and Taobao. For example, they may view products at pop-up stores and then order them on their smartphones for almost-immediate home delivery.
Ele.me, which will continue to operate under its own brand, is at its heart a logistics technology company. Founded in 2008, it utilizes its logistics system to provide services like Fengniao, an express courier for local deliveries. After the deal is finalized, Alibaba said that founder and chief executive officer Zhang Zhuhao (also known as Mark Zhang) will become chairman of Ele.me and special advisor to Alibaba Group CEO Daniel Zhang on its new retail strategy. Wang Lei, currently vice president of Alibaba Group, will take over as Ele.me’s CEO.
In a press release, Zhang said “Under the leadership of its founder and management team, Ele.me has achieved leading market share in China’s online food delivery and local services sector. Our shared belief that New Retail will create more value for customers and merchants has brought us together. Looking forward, Ele.me can leverage Alibaba’s infrastructure in commerce and
find new synergies with Alibaba’s diverse businesses to add further momentum to the New Retail initiative.”
Bloomberg reported at the end of February that Alibaba planned to buy the rest of Ele.me’s shares from its other investors, including Baidu.
The deal deepens Alibaba’s competition with Tencent, in particular its own local services and delivery platform, Meituan Dianping, which was formed by a merger in 2015. Alibaba previously owned shares in Meituan Dianping, thanks to its investment in Meituan, but began offloading them soon after the merger with Dianping.
In a statement, Alibaba said Ele.me complements its affiliate Koubei, a platform that gives restaurants and stores a way to go online and reach more local customers.
“By combining Ele.me’s online home delivery services with Koubei’s consumer acquisition and engagement capability for a range of restaurants and service establishments, Alibaba will be able to offer an integrated experiences to customers both online and offline,” said the company.