Alibaba takes control of logistics
business, pledges $15 billion to expand network
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[September 26, 2017]
By Kane Wu and Cate Cadell
HONG KONG/BEIJING (Reuters) - Chinese
e-commerce firm Alibaba Group <BABA.N> has taken control of logistics
unit Cainiao and pledged to spend 100 billion yuan ($15 billion) over
five years to build out a global logistics network, underscoring
aggressive expansion plans overseas.
Alibaba will invest 5.3 billion yuan to boost its stake in Cainiao Smart
Logistics Network to 51 percent from 47 percent, giving it direct
control over the loss-making affiliate, suggesting a rough valuation of
Cainiao at around $20 billion.
The announcement comes as Alibaba rapidly expands its e-commerce and
logistics network abroad to diversify its consumer base, including newly
announced direct sales channels in counties around Southeast Asia.
"Our commitment to Cainiao and additional investment in logistics
demonstrate Alibaba's commitment to building the most-efficient logistic
network in China and around the world," Alibaba CEO Daniel Zhang said in
a statement on Tuesday.
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Cainiao was the focus of an investigation last year by the U.S.
Securities and Exchange Commission (SEC) into Alibaba's accounting
practices.
Alibaba, which will gain an extra seat on Cainiao's board giving it four
out of a total seven seats, added that more shares were issued in the
funding round to other investors. It did not give details about the
other issuances, which would impact Cainiao's valuation.
The investment also signals Alibaba's intention to boost control over
China's domestic warehousing and delivery market, increasingly
competitive as firms seek to make use of troves of logistics data about
the country's Internet-savvy shoppers.
The firm, headed by billionaire magnate Jack Ma, said that the
longer-term $15 billion investment would be used to develop its data
technology and improve its warehousing and delivery.
The battle to control logistics networks in China has at times created
tensions between e-commerce and delivery firms.
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A logo of Alibaba Group is pictured at its headquarters in Hangzhou,
Zhejiang province, China, October 14, 2015. REUTERS/Stringer/File
Photo
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In June major logistics company SF Holding cut ties with Cainiao,
which provides logistics support directly to Alibaba's top
e-commerce platform Taobao. SF Holding claimed Alibaba had requested
data unrelated to an existing partnership agreement. Alibaba denied
the claims.
Chinese logistics firms have also attracted billions of dollars from
equity investors, though many have faced challenges with recent
public listings.
Shares of ZTO Express Inc <ZTO.N>, which raised $1.4 billion from a
New York IPO last October, are down 22 percent from the listing
price to-date. Best Inc <BSTI.N>, a Chinese delivery firm backed by
Alibaba, raised under half of what it had initially intended to in a
U.S. IPO last week.
A person close to Alibaba, who asked not to be named, said Cainiao
was not currently considering an IPO.
Alibaba and Cainiao declined to comment.
Alibaba co-founded Cainiao in 2013, with partners including
department store owner Intime Group, conglomerate Fosun Group and a
handful of logistics companies. It oversees roughly 57 million
deliveries a day.
(Reporting by Kane Wu in HONG KONG and Cate Cadell in BEIJING;
Writing by Adam Jourdan; Editing by Muralikumar Anantharaman)
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