Home / Shipping / Aviation/ Alibaba takes control of logistics business, pledges $ 15 b to expand network

Alibaba takes control of logistics business, pledges $ 15 b to expand network

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 27 September 2017 00:00

Hong Kong/Beijing (Reuters): Chinese e-commerce firm Alibaba Group 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% from 47%, 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. 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. 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, which raised $ 1.4 billion from a New York IPO last October, are down 22% 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 US 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.


Share This Article


Today's Columnists

Strategising cricket

Monday, 22 January 2018

Your supply chain mechanism is weak. Your new products are not matching the quality (and therefore the blockbuster performance) of the products being phased....

Half-a-million labour demand in the private sector

Monday, 22 January 2018

The nominal market in which workers find paying work, employers find willing workers, and wage rates are determined is defined as the labour market. Labour market outcomes result from a combination of the demand for labour by firms and the labour tha

Now that Bond Commission too has said it, Govt. cannot postpone the reform of Central Bank any more

Monday, 22 January 2018

The Deputy Minister of National Policy and Economic Affairs, Dr. Harsha de Silva, commonly known as Harsha, is reported to have announced the engagement of the International Monetary Fund (IMF) by the Government to amend the present Monetary Law Act

Many roads open

Saturday, 20 January 2018

We have just commenced Yahapalana Year 4. The third anniversary of Yahapalanaya is also the third anniversary of the defeat of the Rajapaksa regime. Both anniversaries coincide happily with the imminence of an island-wide election, the first since 20

Columnists More