Alibaba, Softbank invest $3 billion in Ele.me, Koubei

Qilai Shen | Bloomberg | Getty Images

A driver for Ele.me, Alibaba Group Holding Ltd.’s food-delivery platform, rides a motorcycle along a road in Shanghai, China, on Monday, Aug. 20, 2018. 

Ele.me, the food delivery business owned by Alibaba, and Koubei, have been merged and received $3 billion in funding from the Chinese e-commerce giant and SoftBank, the companies announced Thursday.

Alibaba said in its earning statement that Ele.me would be merged with Koubei, an affiliate company that focuses on bringing local businesses online by providing payment and other technology services. Both firms would sit under a new holding company.

“As a result of this reorganization, subject to closing conditions, we will consolidate Koubei, which would result in a material one-off revaluation gain when the transaction closes,” Alibaba said.

It’s unclear whether the investment from SoftBank is coming from its $100 billion Vision Fund. A spokesperson for SoftBank declined to comment.

The funding comes at a time when Alibaba is battling online rival Tencent in the food delivery space. Tencent is a major investor in Meituan-Dianping, a services app that allows people to order food and buy things like movie tickets. In China, there is a race to dominate the so-called online-to-offline (O2O) space, a phrase which refers to goods and services purchased online that are experienced in physical locations, like restaurant reservations.

Combining Koubei and Ele.me could help Alibaba expand into smaller cities and towns to extend its reach.

SoftBank has been investing heavily in on-demand services such as ride-hailing apps like Uber, which has its own food delivery arm.