Alibaba Group Holding Ltd. has agreed to buy out Baidu Inc. and other investors in Chinese startup Ele.me to shore up its delivery network, a person familiar with the matter said, placing its biggest bet yet in online food and local services. An acquisition would hand Alibaba the biggest chunk of Chinese online food delivery and pit it directly against Meituan Dianping, backed by Tencent Holdings Ltd. Ele.me — which means “hungry yet?” — runs an army of delivery people on motorbikes across the country that could enhance Alibaba’s last-mile ability to get parcels to customers’ doorsteps and complement its Koubei neighborhood services business.
The e-commerce giant, which owned 23 percent of Ele.me as of May, plans to buy the stock from existing investors including Baidu, the person said, requesting not to be named because the matter is private. It’s unclear how much Alibaba agreed to pay, but Ele.me was said to have been valued at between £5.5 billion to £6 billion in a May fundraising last year. The startup then bought Baidu’s delivery business at a £500 million valuation in August 2017, a person familiar said at the time.
Alibaba, Ele.me and Baidu declined to comment. If the deal goes through, Alibaba and Meituan will dominate a Chinese food delivery market that Analysys estimates reached 67.7 billion yuan (£10.7 billion) in 2017’s final quarter, up 16.2 percent from the previous three months. For Baidu, it’s another exit from a business considered peripheral to its core operations in search and artificial intelligence.
Shares in Baidu rose 1.6 percent in pre-market trade. “With its online traffic and Koubei business, Alibaba could create a lot of synergy with this acquisition,” said Steven Zhu, a Shanghai-based analyst with Pacific Epoch. “This would be a drag on the margin, because Alibaba now owns more delivery men and inventory, but it has no choice because long-term wise most consumption still takes place offline.” Alibaba has taken steps to shore up its logistics in recent months, taking over longtime delivery affiliate Cainiao and drawing up plans to invest in warehouses.
Unlike JD.com Inc. however, which builds and runs its own fleet of delivery people, Alibaba’s last-mile capabilities have been confined mainly to third-party partners.
Its investments in so-called “new retail,” such as brick-and-mortar stores and grocery chain Hema, also help shore up the network, by providing delivery points and warehousing for parcels.
The entertainment division of Alibaba Group has signed an agreement to show many of Disney’s movies and series in China on its streaming service Youku, Variety reported. Over 1,000 episodes of Disney series are covered, including “DuckTales” and “My Friends Tigger and Pooh”. For the first two years of the deal, 600 of these episodes will be exclusive to Alibaba.
The rights to 100 Disney films have also been secured. These are not exclusive to Youku. Disney’s streaming service, DisneyLife, stopped operating in China nearly two years ago.
Chinese regulators reportedly shut down the service five months after it launched.
Alibaba Group Holding Ltd. was cited again as a marketplace for fakes on a U.S. blacklist, another sign of increasing tension between the U.S. and China. The Office of the U.S. Trade Representative on Friday included Alibaba’s Taobao online marketplace on its list of “Notorious Markets,” citing a high volume of reported counterfeiting and piracy.
The agency acknowledged steps Alibaba has taken to make it easier for fakes to be removed, but said “the enforcement program reportedly continues to be burdensome and insufficient to end the sale of counterfeit products on the platform.” In response, Alibaba’s President Mike Evans said in a blog post that the company’s presence on the list “is not an accurate representation of Alibaba’s results in protecting brands and IP, and we have no other choice but to conclude that this is a deeply flawed, biased and politicized process.” Trade tension between the U.S. and China is increasing as China’s economy continues to grow quickly and its companies expand overseas.
Chinese acquisitions of U.S. companies have been thwarted by lawmakers recently. Ant Financial, the Chinese financial services giant controlled by Alibaba co-founder Jack Ma, failed to win approval from a key U.S. government panel for its plan to buy MoneyGram International Inc. The decision by the USTR is a blow to Alibaba’s international expansion strategy, which depends on winning the trust of U.S. and global brands.
Alibaba dominates e-commerce in China, with Taobao and the company’s other shopping platforms accounting for the majority of online retail sales, but it’s a bit player in the U.S. still.
Alibaba said more than 230,000 Taobao stores were closed from September 2016 to August 2017.
The company has also provided leads to law enforcement that resulted in more than 1,000 arrests and the closing of nearly 1,000 manufacturing and distribution locations.
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