Alibaba plans to merge food delivery units amid competition from Tencent-backed Meituan

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Alibaba merging China food delivery units to counter Tencent-backed Meituan – Reuters

What happened: Alibaba intends to merge its food delivery units, namely Ele.me and Koubei, and raise funds for the new mega-entity. Alibaba is reportedly looking to raise between $3 billion and $5 billion for the combined business while SoftBank’s Vision Fund is expected to take the lead. The fundraising could value the new unit up to $25 billion.

Why it’s important: Combining existing businesses would put Alibaba in a better position to dominate China’s fiercely competitive on-demand services market, which is brimming with startups offering everything from food delivery to massage services. Ele.me and Tencent-backed Meituan are the biggest food delivery service providers in China and the rivalry between the two intensified after Baidu dropped out of the race last year and Alibaba acquired Ele.me in April.