Alibaba to Invest $1.25 billion in Ele.me

Alibaba is going to invest $1.25 billion in Ele.me, a 6-year-old food delivery service, based in Shanghai.

According to a report from caixin.com on Friday, the deal is valued at $1.25bn (£837m, €1.14bn) and the Chinese e-commerce giant Alibaba will obtain a 27.7 percent stake in Ele.me, becoming its largest shareholder.

Ele.me, is known for online-to-offline (O2O) Chinese restaurant takeout services. O2O, which can stand for online-to-offline or offline-to-online, is shorthand for the business of convincing e-commerce customers to spend money on offline businesses. These include taxi hailing and restaurant review apps that link smartphone users with offline businesses.

Ele.me is estimated to be valued at USD 4.5 billion, and will be operated independently.

This is not the first capital raise for the start-up. Ele.me, roughly meaning “Hungry Now?”, raised $350m (£234m, €319m) earlier this year from investors including Sequoia Capital, CITIC Private Equity, Tencent Holdings, JD.com and Dianping.

Ele.me turns to Alibaba, after losing support from China’s Yelp, Dianping, following the recent Meituan-Dianping merger. Ele.me received USD 80 million from Dianping in a series of financing last May.

The investment will allow Alibaba to attract more users to its own platform, considering that a growing number of the Chinese population use their mobile phones for everything — from shopping to booking restaurants.

As Alibaba would become Ele.me’s controlling stakeholder, it will combine the company with its own, albeit, much smaller Koubei take-out dining service.

Ele.me and Alibaba did have a meeting regarding capital investment, but detailed information was not yet available. The deal is expected to be completed after China’s Spring Festival in February 2016.