Alibaba to purchase Ele.me for $9.5 billion

Alibaba Group Holding Ltd. is purchasing the entire control of the startup Ele.me. The move is aimed to expand in China’s fast-growing market for local delivery of food and other services. The enterprise valuation of the business is $9.5 billion. Alibaba and affiliate Ant Small and Micro Financial Services Group Co. already owned about 43 percent of the startup.

Ele.me — which means “hungry yet?” — operates an army of delivery people on motorbikes across the country. The food delivery market is on the rise as people increasingly turn to their phones to order food.

“As one of the most frequently used applications, food delivery is the single most important entry point in the local services sector,” Daniel Zhang, chief executive officer of Alibaba Group, said in an internal email to staff Monday. “We can already see that a vast, multi-dimensional local instant delivery network formed through a food delivery service will be an essential piece of the commerce infrastructure.”

Reports have surfaced that Alibaba plans to buy out other investors in Ele.me.

The Ele.me deal is part of a broader foray by China’s largest e-commerce company into logistics and brick-and-mortar assets. The company has also made investments in traditional retailers, including department store chain Intime Retail Group Co. and China’s largest operator of Walmart-style hypermarkets.

Alibaba continues an expansion in e-commerce as it faces greater competition across Asia. Last month, the company said it would invest another $2 billion in Lazada Group SA to support its presence in Southeast Asia, where Amazon.com Inc. has launched in Singapore and Sea Ltd.’s Shopee is expanding to win consumers.

The Ele.me deal may cut into profit margins in the short term, but Alibaba has demonstrated a willingness to make such acquisitions for gains in the future.

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Image via NyTimes