Alibaba to Buy Baidu’s Stake in Chinese Food Delivery Platform Ele.me

According to a source close to the situation, Chinese e-commerce giant Alibaba will be buying out Baidu’s stake in China’s top food takeout app, Ele.me.

The unidentified source says that Alibaba will be buying out Baidu’s stake as well as other investors in Ele.me as it dives deeper into the food delivery market.

If the acquisition is successful, it would carve out the biggest piece of China’s online food delivery market for Alibaba. It would also make it a direct rival of Meituan Dianping, which is backed by Tencent Holdings Ltd.

Alibaba currently owns about 23% of Ele.me as of last May. It plans to buy stock from Baidu, but it has not been revealed how much or at what price.

Ele.me is estimated to have a value of around $5.5 billion to $6 billion.

“With its online traffic and Koubei business, Alibaba could create a lot of synergy with this acquisition,” remarked Steven Zhu, an 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.”

Disclaimer: We have no position in Alibaba Group Holding Ltd (NYSE: BABA) and have not been compensated for this article.