Alibaba to buy stake in online food delivery service Ele.me for $1.25bn

Alibaba Group Holding has agreed to purchase a minority stake in Ele.me, a Chinese online food delivery start-up. The deal is valued at $1.25bn (£837m, €1.14bn) in exchange for a 27.7% stake.

This is not the first capital raise for the start-up. Ele.me, meaning "Hungry Now?", raised $350m (£234m, €319m) earlier this year from investors including Sequoia Capital, CITIC Private Equity, Tencent Holdings, JD.com and Dianping.

The move to invest in an online-to-offline services (O2O) company such as Ele.me will allow Alibaba to attract more users to its own platform, considering that a growing number of the Chinese population use their mobile phones for everything – from shopping to booking restaurants. The deal also makes Alibaba the biggest shareholder in Ele.me, according to Reuters.

Other O2O service providers such as taxi apps and restaurant review apps that connect smartphone users with offline businesses have seen increased investor interest from companies, including Tencent and Baidu.

The total investment made by Alibaba and social networking and video games giant Tencent last year has been more than $8bn (£5.4bn, €7.3bn). Some of the companies that they have invested in are very similar in terms of operation and business model, such as taxi hailing apps Kuadi Dache and Didi Dache.

Alibaba has been active in the M&A scene this quarter. While earlier this month it agreed to buy South China Morning Post, an English-language newspaper in Hong Kong, in an effort to deepen its reach into the media space, in November it said it would buy the rest of Youku Tudou, China's version of YouTube, it doesn't already own in an all-cash deal.

Also, in August, the world's biggest e-commerce company acquired around 20% stake in consumer electronics retailer Suning Commerce for $4.6bn (£3bn ,€4.19bn)— its biggest deal ever.