(Yicai Global) Aug. 24 -- Ele.me, internet-based popular food delivery company backed by China's e-commerce giant Alibaba Group Holding Ltd. [NYSE:BABA] and owned by Shanghai Lazhasi Information Technology Co., will finally acquire its rival waimai.baidu.com, search engine giant Baidu's take-out delivery business. Alibaba Group [NYSE:BABA] is the controlling shareholder of Ele.me.
Yicai Global exclusively reported on Aug. 21 that Ele.me would announce buyout of Baidu's take-out delivery business this week despite the company remained silent on the deal. Once the deal is finalized, Baidu will hold shares in Ele.me and also receive some cash. Yicai Global's exclusive report three days ago also indicated that Baidu's take-out delivery business would still operate independently under the current brand for about one year even after the takeover deal.
The two parties held prolonged discussions over the deal. Some media reports said Ele.me CEO Zhang Xuhao led a business team to visit Beijing for negotiations in June.
As the top three meal delivery services in China's take-out market, Meituan Waimai, Ele.me and Baidu's take-out delivery business grab a huge chunk of the market share. But, after the deal, Meituan and Ele.me will be the only two important players in the market.
In 2015, Alibaba held 27.7% stake in Ele.me with the investment of USD1.25 billion, becoming the largest shareholder in the company. Bloomberg reported Alibaba Group and its financial arm Ant Financial Services invested at least another USD1 billion in Ele.me in May 2017. The insiders believe that this investment provided necessary funds for the acquisition of Baidu's take-out delivery business.
To prevent the rival Meituan from operating its own payment business and targeting Alipay business, Alibaba's investments in the catering market focus on payment rather than the catering business. The online-to-offline (O2O) catering service market pattern has been established right after Meituan acquired Dazhong Dianping half year ago, e-commerce analyst Li Chengdong commented.
"Both Meituan and Ele.me will continue with their integration strategies in the next one to two years. By then, one company is expected to hold a monopoly position in China's take-out market, just like Didi Chuxing in the ride-hailing market," Zhu Yue, executive director of the China Insights Consultancy, told Yicai Global.