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


COMMENTS

Today's Columnists

Bringing beedi into tax net can yield Rs. 40 b in revenue

Tuesday, 24 October 2017

Last week, the Financial Times quoted an AFP article that stated Sri Lanka will start regulating the toddy industry to boost tax revenues from the informal sector. This same principle should be applied to the beedi trade, which has also grown unabate


Grade 5 Scholarship examination and the future of the country

Tuesday, 24 October 2017

The Grade 5 scholarship examination results have been released recently. Although this is known as the “Mothers’ exam,” the mentality of the children can be well articulated when children come from the examination halls after the exams. Today w


Need for tax reforms: Government should not lose it this time but go for them early

Monday, 23 October 2017

In the first economic policy statement, Prime Minister Ranil Wickremesinghe made a number of pledges related to taxes and tax reforms. One was that the Government would review whether the tax concessions given to investors have really delivered the e


Lessons from Geneva

Saturday, 21 October 2017

‘Mission Impossible – Geneva’ is an inspiring account of developments at the Human Rights Council in Geneva when Dayan Jayatilleka was our Permanent Representative there. It is written by his wife Sanja, which provides for fascinating insights


Columnists More