Alibaba raises $4.4b for Chinese food delivery service

Jack Ma, founder and chairman of Alibaba. Photo / AP

SoftBank has lead a US$3 billion ($4.4b) funding round into Ele.me, the food delivery division of Chinese technology company Alibaba.

Alibaba will merge the Ele.me delivery unit with Koubei, which focuses on connecting restaurants to the internet, reports the Daily Telegraph.

China's food delivery market is expected to be worth up to 1.3 trillion Chinese yuan ($288.3b) by 2021, according to market research company Mintel.

"As a result of this reorganisation, subject to closing conditions, we will consolidate Koubei, which would result in a material one-off revaluation gain when the transaction closes," Alibaba said.

On Thursday, Alibaba reported lower profits than analysts expected.

It is unclear if SoftBank's investment into Alibaba's food delivery division was made from its US$100b Vision Fund, which has backed technology companies including Uber and office space business WeWork.

Ele.me was acquired by Alibaba in April when the business purchased a controlling stake in the company in a deal which valued it at US$9.5b. "Food delivery is the single most important entry point in the local services sector," Daniel Zhang, Alibaba's chief executive, said at the time.

Alibaba's investment for its Ele.me challenges rival Chinese food delivery business Meituan Dianping, which recently filed to go public in Hong Kong and is seeking to raise up to US$4b from the float with a valuation around US$60b.

Meituan Dianping has been backed by Chinese technology business Tencent, a rival to Alibaba. Tencent announced its first profit fall in 13 years earlier this month following sluggish performance of its mobile game divisions.