• It’s said to be in talks to sell to an Alibaba-backed rival
  • Waimai may go for under half its previous $2.5 billion value

Baidu Inc. is planning to sell its money-losing food delivery unit at a discounted price to a competitor backed by Alibaba Group Holding Ltd., a person familiar with the matter said.

The business could be sold to Ele.me at a valuation that’s less than half the $2.5 billion it fetched during its last round of fundraising, the person said, asking to not be identified discussing a private matter. Selling Waimai would put an end to heavy cash losses for Baidu, China’s biggest search engine, as it struggles in China’s competitive on-demand services market and shifts its bets to artificial intelligence, the person said.

A deal would shore up Ele.me’s lead in a fiercely competitive industry that depends on scale, while bringing millions of users onto Alibaba’s e-commerce and payments network. Ele.me and Baidu declined to comment on queries about a potential sale, which Caijing reported earlier.

Once a key component of Baidu’s so-called “online-to-offline” strategy, Waimai ran up against foes backed by Alibaba and Tencent Holdings Ltd. The deep-pocketed internet giants, who both have market…