Alibaba’s newly-minted local service unit secures $3 billion before rival IPO

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Alibaba confirms it raised $3B for its newly consolidated local services business– TechCrunch

What happened: Alibaba’s food delivery service Ele.me and O2O unit Koubei have been merged to a new holding company under the e-commerce giant. The new affiliate received $3 billion in funding from Alibaba and SoftBank, the parent company announced in its financial report.

Why it’s important: Chinese tech giants are fighting to gain supremacy in the online-to-offline (O2O) space where local businesses and food delivery, in particular, are brought online. Alibaba reconstructed Koubei in 2015 to tap into the O2O sector. It invested and then fully acquired Ele.me earlier this year. Combining the two businesses could create more synergies and put the firm in a better position to dominate China’s fiercely competitive O2O market. In addition, it is widely reported that Alibaba is considering to integrate another local service Hema Store in the new business unit. The Alibaba and SoftBank funding comes at a time when Ele.me is battling its rival Meituan-Dianping in the food delivery space. Meituan Dianping, which Tencent holds a stake in, is heading for a Hong Kong IPO. China’s ride-hailing giant Didi Chuxing has also joined food delivery war.