Ele.me may go to Alibaba

As more people start using their smartphones or the internet to order food, China’s eCommerce leaders are in a battle for supremacy.

Now a food-delivery startup backed by Tencent Holdings, Ele.me, is planning a fast funding round of at least $1.25 billion, in a deal led by competitor Alibaba Group Holding, reports Deal Street Asia. It is aiming to close the round next month.

If it goes ahead, Alibaba will become Ele.me’s controlling shareholder. It values the service at about $4.5 billion, and the deal could be announced before the Lunar New Year holiday starting on February 8, according to an insider.

Earlier merger talks between Ele.me and group-buying site Meituan.com fell through, and Caixinpreviously reported that Ele.me was in discussions with Alibaba to raise funds.

Meanwhile, Tencent and Alibaba are battling with China’s largest search company Baidu for front position as the local-services industry gains traction with more people going online or using mobile technology to order food, schedule beauty treatments or hire domestic helpers. Users of these services are predicted to rise 29 per cent to 400 million by next year, with sales expected to reach 7.28 trillion yuan ($1.1 trillion).

Chinese internet companies have been the subject of $91.6 billion in acquisitions and investments over the past 12 months, according to Bloomberg data. Meanwhile, Tencent shares have fallen 1.7 per cent in Hong Kong to HK$133.10 ($17.08) – the lowest in almost four months.

Alibaba and its financial affiliate, Zhejiang Ant Small & Micro Financial Services Group, have formed a joint venture called Koubei, in which each has agreed to invest three billion yuan to help the company expand into neighbourhood services.

Baidu last year said it would invest $3.2 billion over three years in its own provider of local services,Nuomi.