Alibaba Readies Table for Showdown of Takeout Dining Platforms

Alibaba Group Holding Ltd. has officially merged its food delivery service Ele.me with food review platform Koubei, a strategy that Alibaba had announced in August when it released second-quarter earnings results.

The new venture, Alibaba Local Life Services Co, is touted as the e-commerce giant’s “flagship local services vehicle” and has secured $3 billion from backers, including Japanese conglomerate SoftBank.

Ele.me CEO Wang Lei will head the new business and will directly report to Alibaba CEO Daniel Zhang, who will succeed incumbent Chairman Jack Ma in less than a year, according to a company statement.

China’s on-demand local service market is becoming a new battlefield for internet giants seeking to connect more online users with offline merchants by offering takeout, grocery delivery and reservation services.

The Ele.me-Koubei merger is set to launch an offensive against the newly Hong Kong-listed Meituan Dianping, the sector’s goliath. It was formed after Meituan’s $15 billion merger in 2015 with top rival Dianping, which operated an app similar to U.S. online restaurant review site Yelp Inc.

Alibaba founded Koubei more than a decade ago as a restaurant rating and local services search site. But Koubei was not in full operation until June 2015 when Alibaba and Ant Financial Services Group, operator of mobile payment platform Alipay, jointly injected 6 billion yuan ($868 million) to revive the brand.

In January 2017, Koubei received $1.1 billion in funding from a group of investors that included the U.S. private equity firm Silver Lake Partners, Jack Ma-backed Yunfeng Capital, CDH Investment, and Primavera Capital Group.

Alibaba took control of Ele.me in May in a deal that valued the 9-year-old startup at $9.5 billion as the e-commerce giant pushed into the hotly contested multibillion-dollar online food-delivery sector. The buyout is an important part of Alibaba’s “New Retail” strategy to connect online and offline retail spaces.

Contact reporters Coco Feng (renkefeng@caixin.com) and Jason Tan (jasontan@caixin.com)