Mergers & Acquisitions
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Start-ups

Ele.me may buy out Baidu’s food delivery business to get a leg up over rival Meituan-Dianping

PUBLISHED : Tuesday, 22 August, 2017, 5:36pm
UPDATED : Tuesday, 22 August, 2017, 10:46pm

Ele.me, the Chinese food delivery service backed by the world’s largest e-commerce operator Alibaba Group Holding, is poised to buy out smaller rival Baidu Waimai, in an industry shakeup that will see it getting a leg up over its biggest competitor Meituan-Dianping.

Ele.me is poised to pay US$500 million to buy out Baidu’s food delivery operations in cash and stock, according to a report by Chinese media Caijing. Neither Baidu nor Ele.me responded to requests for comment. Alibaba, which the latest round of US$1 billion investment in Ele.me, is owner of the S outh China Morning Post.

The plan would leave two of Asia’s biggest technology companies to divide up the lion’s share of China’s takeaway business, where the number of delivery orders rose almost 42 per cent in the first half to 295 million.

Ele.me would have an estimated 53.4 per cent share of China’s food delivery market, compared to the current 35 per cent before the acquisition, while Meituan-Dianping -- backed by the operator of China’s largest social network, Tencent Holdings -- would have 40.7 per cent, according to data by the China Electric Commercial Research Centre (CECRC).

“The merger will help Ele.me occupy the high-end market” that Baidu Waimai focuses on, said Cao Lei, director at CECRC. “The technology of artificial intelligence adopted by Baidu Waimai is expected to be commonly applied in food delivery sector.”

The sale of the unprofitable food delivery business comes at a critical time for Beijing-based Baidu, which is trying to remake its dominance of China’s internet search business into the country’s leading investor in artificial intelligence, with applications from big data analysis to autonomous driving, after tighter government control in internet advertising hurt its revenues.

“A sale of the food delivery business to Ele.me would be a positive result for Baidu,” said Kirk Boodry, analyst with New Street Research. “An exit and focus on areas where it can generate value is probably the right thing to do.”