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Alibaba Wants $1 Billion for Koubei Expansion

| Oct 21, 2016 10:49 PM EDT

Alibaba is seeking to expand its local services through Koubei.

Chinese e-commerce giant Alibaba Group Holdings Ltd. is reportedly seeking to raise $1 billion in a bid to expand the operations of its affiliate Koubei.

The company said to be seeking a valuation of $8 billion for Koubei in its latest fund raising effort, Bloomberg reported. According to people familiar with the plan, the new funding will be used to expand the affiliate's operations to other cities.

Koubei is a company dealing with online orders for service provided offline, such as food deliveries, which was its initial focus. It has since branched out to cover other similar services. The company has reportedly experienced significant growth in the last few years, with it handling around $5 billion payments for the second quarter of 2016.

Alibaba's financial arm Ant Financial has been largely the one funding Koubei. In June, however, the two entities have agreed to put out $445 million each for the venture.

The companies are also hoping that the new fundraising effort will bring in new investors. Alibaba has reportedly already sought the help of the Credit Suisse Group in attracting those investors to Koubei, The Country Caller reported.

The Chinese tech giant's move to further expand Koubei is seen by observers as part of its efforts to focus more on the various local services it has under its wing after it sold its stake in Meituan Dianping, a company that both it and rival Tencent Holdings Ltd. backed.

In an earlier interview, Alibaba founder Jack Ma said that it is important for them to explore online-to-offline markets to get better footing outside of its usual e-commerce market. The offline local services market is expected to grow to around $1 billion in 2017 as more people begin to avail of these. However, Koubei is facing stiff competition from Baidu's and Tencent's own service providers.

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