Alibaba to Raise Around $1 Billion for Koubei Platform
October 18 2016 - 7:50AM
Dow Jones News
Chinese internet giant Alibaba Group Holding Ltd. is planning to
raise around $1 billion to fund the expansion of its local-services
platform, Koubei, which could value the venture at nearly $8
billion, according to people familiar with the situation.
The new fundraising would bring in outside investors to set a
valuation benchmark for the business, according to the people.
Koubei, which operates in the competitive field of online orders
for offline services such as food delivery, has thus far been
funded largely by Alibaba and its financial affiliate Ant Financial
Services Group. The outside fundraising could set the operation up
to become more independent, allowing it to list shares as a
separate entity eventually, the people said.
The terms of the deal haven't been finalized and could change as
Alibaba negotiates with potential investors. The Chinese
online-shopping giant has hired Credit Suisse Group AG to reach out
to a small group of prominent international investors that already
have close relationships with Alibaba for the deal, they said.
Alibaba and Ant Financial together put nearly $1 billion into
Koubei—which means "word-of-mouth reputation" in Chinese— for 50%
equity stakes in the operation when it was launched in June 2015.
The two have since also made a combined $1.25 billion investment in
popular food-ordering app Ele.me.
China's internet giants have sought to expand their shares of
the fiercely competitive market for smartphone applications
connecting users with brick-and-mortar services such as taxi rides,
food deliveries, restaurant bookings and movie ticketing. Alibaba
had been an early backer of Meituan, China's biggest online seller
of movie tickets and restaurant bookings, but it offloaded its
stake after it clashed with that company's founder, Wang Xing.
Meituan decided to merge with Dianping, a competing service backed
by Alibaba rival Tencent Holdings Ltd.
Koubei initially focused on food-and-beverage deliveries, but
has expanded into other online-to-offline services by allowing
merchants to set up virtual stores on its platform. Koubei has
grown rapidly, even though it remains unprofitable. In the quarter
ended in June, Koubei recorded $5 billion in payments through Ant
Financial's Alipay service, up 48% from the previous quarter,
Alibaba said in its latest earnings release. Alibaba said its share
of Koubei's losses in the quarter were $37 million.
Many startups have burned out in the battle to attract users
with heavy discounts and subsidies, but the likes of Alibaba and
Tencent say they have deep pockets and supporting services such as
maps, data and payments platforms to give them an edge over
smaller, stand-alone competitors.
Alyssa Abkowitz contributed to this article.
(END) Dow Jones Newswires
October 18, 2016 07:35 ET (11:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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