Ele.me.com, a Shanghai based startup that offers customer-to-customer meal ordering services announced recently that it is set to sell all the outstanding shares to Alibaba Group. The deal with China’s biggest e-commerce company, whose Chinese name roughly translates to “Hungry yet?” is valued at $9.5 billion.
While talking about how the deal proceeded, Daniel Zhang, a chief executive officer of Alibaba Group, described the growing market of food delivery service. He said, “As one of the most frequently used applications, food delivery is the single most important entry point in the local services sector.We can already see that a vast, multi-dimensional local instant delivery network formed through a food delivery service. (This) will be an essential piece of the commerce infrastructure.”
While talking about the Alibaba’s deal with Ele.me, its CEO Danial 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.”
China’s e-commerce market is growing fast. According to iiMedia research firm, China’s online food delivery market, expected to grow 18 % ($38 billion) this year. Keeping an eye on these developments, Alibaba decided to fix a deal with Ele.me. “Whenever Alibaba have seen long-term upside they haven’t been hesitant about buying something in,” said Kirk Boodry, an analyst with New Street Research. According to companies statement, the Alibaba Group and its affiliate Ant Small and Micro Financial Services Group already owned 43 % of Ele.me’s shares. The recent deal provided Alibaba Group with special control over Ele.me and it has established the full ownership of Alibaba group over Ele.me.
After finalizing the deal, the company executives also saw a change of internal positions come into effect. The Ele.me’s founder and CEO Zhang Zhuhao will head the company as the Chairman of Ele.me and Alibaba group’s special advisor and CEO Danial Zhang will head the retail strategy division. Alibaba groups vice president Wang Lei will take a position as Ele.me’s new CEO.
This deal could be a part of the larger reconstruction strategy by Alibaba over the upcoming years. The company plans to merge Ele.me with Koube, a local services platform. The focus of Ele.me will on delivering food to people while Koubei will focus on getting people to buy goods and services online.
