HONG KONG (Reuters) - Chinese ride-hailing giant Didi Chuxing and Alibaba's BABA.N Ant Financial are in talks with bike-sharing startup Ofo for a joint buyout offer that could value Ofo at up to $2 billion, according to a source with direct knowledge of the discussions.

FILE PHOTO: Bicycles of bike-sharing company Ofo are seen on a vacant lot in Zhengzhou, Henan province, China May 20, 2018. Picture taken May 20, 2018. REUTERS/Stringer

A deal would mark the latest stage of consolidation in China’s once-booming bike-sharing industry, where a series of startups have burned through hundreds of millions of dollars in the fight to dominate key cities, littering the streets with thousands of bikes in the process.

It would bring Alibaba-backed Ofo even deeper into the e-commerce giant's orbit, just months after Ofo rival Mobike was snapped up in a $2.7 billion deal by Meituan-Dianping, the on-demand online service provider with links to Tencent 0700.HK, a backer of Mobike.

Didi, which already owns a stake in Ofo, has hired a third-party agency to conduct due diligence on the startup’s business and finances, the source said. The offer may be lowered or even dropped if Ofo’s business turns out to be worse than expected after the due diligence is completed, the source said.

Chinese local media first reported Didi and Ant teaming up to bid for Ofo.

Spokeswoman for Didi and Ant declined to comment. Ofo did not immediately respond to requests for comment.

Japanese telecoms and technology giant SoftBank Group Corp 9984.T is a shareholder in both Didi and Alibaba, and it partnered with Ofo last year for the bike sharing firm's expansion into Japan.

Besides engaging in tight competition in China, Mobike and Ofo have aggressively expanded abroad, with Beijing-based Ofo saying on its website that it runs more than 10 million bikes in over 20 countries.

However, media reports in recent weeks have said the company has scaled back or shut down operations in markets such as Australia and India.

In March, Ofo said it raised $866 million in a new funding round led by Alibaba, which it described as the largest investment garnered in a single round by a bike-sharing startup.

(This version of the story corrects 7th paragraph to show SoftBank is a shareholder in Didi and Alibaba and only partnered with Ofo)