E-COMMERCE: Ele.me, Caixin Take Money, Keep Distance from Alibaba

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Bottom line: Cautionary comments from Caixin and Ele.me about investments from Alibaba and its affiliates reflect a growing wariness from companies at accepting money and yielding control to the e-commerce giant.

Alibaba's Ant invests in Caixin
Alibaba’s Ant invests in Caixin

The voracious Alibaba (NYSE: BABA) is in 2 new M&A headlines as we head into the end of the week, led by word that its Ant Financial affiliate was an investor in a new fund-raising round in Caixin, one of China’s best respected financial media. A second headline has take-out dining pioneer Ele.me denying reports that Alibaba, which is already one of its biggest shareholders, will devour the company completely. Instead, Ele.me is saying it will continue working closely with Alibaba’s own take-out delivery service called Koubei.

Both headlines reflect a growing resistance by founders of these companies to outright ownership by Alibaba-related companies. In the first case, Caixin was quick to issue a statement saying Ant was only one of several new investors in its new funding round. Ele.me’s case is similar, quashing earlier speculation that it would ultimately get swallowed up by its cash-rich backer.

A third element in the non-stop flurry of Alibaba-related deals is the element of who is the actual owner in each case. For Caixin, the investor appears to be Ant Financial, operator of the popular Alipay service, which is controlled by Alibaba founder Jack Ma but has no equity relationship with Alibaba itself. Alibaba holds a direct stake in Ele.me, while Jack Ma has also personally bought many of the assets linked to  the company.

That element of the story is important if we want to look at the ultimate goal in this Caixin investment, which is the latest in a recent string of media purchases by Alibaba-related companies. Reports on the investment only say that Ant has invested in Caixin. (English article; Chinese article) Original reports on the investment prompted Caixin to put out a statement saying Ant was one of several new investors, and that it intended to remain independent under its current editorial management.

This particular investment follows Alibaba’s establishment of a financial news joint venture last year with China Business Network (CBN), another one of China’s top financial media. In December, Alibaba also purchased the Hong Kong-based South China Morning Post, one of Asia’s oldest and most influential English-language media.

Media Marriage?

These 3 media investments will inevitably lead some to wonder whether Jack Ma may try to merge the trio, or force them to work closely together to achieve more synergies and someday create a giant capable of competing with the likes of the Wall Street Journal. I do suspect that’s his ultimate aim, though Ma has made so many acquisitions over the last 2 years that this particular area will probably end up as one of his lower priorities.

Next there’s the Ele.me news, which simply has an unnamed company insider quashing recent rumors that Alibaba was preparing to launch a bid for the company. (Chinese article) The reports come about 3 months after Alibaba paid $1.5 billion for a third of Ele.me, China’s earliest and largest operator of a web-based take-out dining service. (previous post)

The source said Ele.me will continue to work closely with Alibaba’s own Koubei take-out dining service by pooling resources and other cooperation, but that otherwise the pair will operate independently. I’ll admit that I was one of those who earlier predicted that Alibaba would make a bid to buy Ele.me, since it lacked a major presence in the fast-growing online to offline (O2O) space where Baidu (Nasdaq: BIDU) and Tencent-backed (HKEx: 700) Meituan-Dianping have launched major recent campaigns.

The most interesting common theme to these 2 stories is the growing resistance by these companies to full ownership by Alibaba. At the end of the day, no one is shy about taking Alibaba’s money. But at the same time, owners of these companies probably worry about losing focus and becoming lost in Alibaba’s growing and increasingly diverse empire if they yield full control.

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