The Chinese e-commerce giant Alibaba Group is considering merging its food delivery units and raising funds for the conjoined entity. Sources claim that the decision is set to intensify the competition between Alibaba and online to offline service platform Meituan Dianping to lead the nation’s growing on-demand service market.

As per credible reports, Alibaba’s food delivery platform Ele.me will be merged with Koubei, its lifestyle service firm. Alibaba is planning to raise between $3 billion to $5 billion for the merged company, which possibly will be valued at $25 billion.

For the record, the merger and its funding are currently looked after by Alibaba’s Hong Kong-based task force. Meituan Dianping is backed by Tencent Group, which is in talks with Google to conjointly launch cloud services in China, claims Bloomberg. According to experts, this may pose a threat to Alibaba Cloud.

Incidentally, these companies are also competing to retain their stance in China’s rapidly growing, online-to-offline market that is remnant of applications to link smartphone users with their stores, so they can offer local food delivery services. In 2017 the value of O2O transactions in China got a 72% boost, claim analysts.

Alibaba and Meituan are the two primary companies that provide extensive O2O services, stated Mo Jia, a research analyst with Canalys. Alibaba’s three units are very similar and merging them to compete with Meituan is a logical decision, Jia added. 

From what sources claim, the fundraiser is expected to be launched by the end of this year, and Alibaba’s Hema Fresh, a supermarket offering food delivery, will also be a part of the new unit.

Reportedly, Didi Chuxing, the nation’s largest ride-hailing firm also launched its own food delivery service in April. According to trusted sources, Meituan Dianping is planning to raise $4 billion when it makes its way to Hong Kong in the coming months.