Ele.me, Koubei Merge; Get $3B From Alibaba, SoftBank

Alibaba and SoftBank have invested $3 billion into Ele.me, the food delivery company that is owned by Alibaba. According to a report in CNBC, Ele.me also merged with Koubei, with the combined company getting the funding.

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

Koubei is an affiliate company that is focused on getting local businesses online. It offers payment and other technology services, noted the report. CNBC said that it’s not clear if the investment is coming from SoftBank’s $100 billion Vision Fund that is investing in technology companies around the world.

The news comes on the heels of Alibaba reporting quarterly earnings Thursday (Aug. 23), in which it topped expectations for the period that ended June 30, perhaps alleviating concerns that had bedeviled rivals such as Tencent. The core eCommerce business showed robust growth, while the company still seeks diversification away from that line, which includes online retail sites Tmall and Taobao.

In terms of the fiscal first-quarter (2019) tallies of the top and bottom lines: The company posted sales of 80.9 billion RMB, which slightly bested the consensus. In terms of net income, that came in at 8.7 billion RMB, which ties into funding for Ant Financial, the financial services arm of the company, and where net income was down 41 percent as a result of that activity.

As had been reported, during the period, the company exercised an option to acquire roughly a third of Ant, which has seemingly pulled away from listing on the public markets. Though not explicitly broken out in filings by Alibaba, The Wall Street Journal estimated that pre-tax profit at the unit slumped to 2.4 billion yuan from 5.3 billion yuan last year.

Yet despite the various impacts to items below the revenue line, net income per share, at 3.30 RMB, was better than consensus of 2.6 RMB. Shares at this writing seemed to react positively to the news, up about 3 percent just after the announcement.