Alibaba eyes bigger role in global logistics sector with YTO stake purchase

September 10 15:48 2020

As competition intensifies in China’s logistics market, e-commerce giant Alibaba is deepening its collaboration with major domestic couriers to explore opportunities in international and digital businesses.

In a public filing to be dated on Wednesday, Shanghai-listed YTO Express said it will transfer 12 percent of the stake in YTO Express valued at 6.6 billion yuan, or 17.406 yuan per share, to Alibaba in Hangzhou.

The deal will increase Alibaba’s shareholding in YTO Express to 22.5 percent upon completion of the transaction.

“For years, Alibaba has been consistently strengthening its collaboration between its logistics arm, Cainiao Smart Logistics Network, and major express delivery firms,” said Kuang Peiqin, an industrial analyst with Zheshang Securities.

To date, Alibaba has acquired a 33 percent stake in Best Inc, 8.7 percent of ZTO Express, 14.65 percent in STO Express, and 2 percent in Yunda, public information showed.

“The Chinese tech giant’s increased shareholding in these couriers is expected to raise the efficiency of the Chinese logistics sector, and intensify the competition among express firms as well,” said Yuan Ding, industrial analyst with Huatai Securities.

China’s express delivery business soared from 3.67 billion packages in 2011 to 63.52 billion units in 2019, a compound annual growth rate of 42.82 percent. The figure stabilized to 22.05 percent growth in the first half this year with 33.88 billion parcels delivered, according to data published by the State Post Bureau of China.

More players joined the logistics sector in the second quarter, and a price war is looming among major delivery companies.

“After announcing a 42 percent rise in the half-year report thanks to its advantage in air cargo business, SF Express saw its share price soar recently,” said Chen Zhuo, a senior analyst with China Merchants Securities.

Likewise, operating a fleet of 12 cargo aircraft, YTO Express reported 52.49 percent rise in business volume, and a 40.63 percent year-on-year increase in its net profit in the second quarter of the year.

The share purchase deal is part of the strategic cooperation inked between Alibaba and YTO Express, as the two parties vowed to collaborate in promoting express logistics, air freight, international networks and supply chains, and information technologies, the Shanghai-based express delivery firm said.

“The keys of the strategic collaboration are globalization and digitalization,” said a separate filing of the listed company.

Since the outbreak of COVID-19, YTO’s cargo fleet has carried a number of flights for Cainiao to destinations which include Malaysia and Pakistan.

Currently, YTO Express is partnering with Cainiao and China National Aviation Corp (CNAC) in establishing a HK $12 billion new logistics hub at Hong Kong International Airport.

The 380,000 square meter facility is expected to integrate the three parties’ strength in the fields of air cargo transport, e-commerce, and express delivery networks. It is scheduled to start operations in 2023.

YTO Express and Cainiao are co-developing logistics facilities and establishing smart logistics big data applications. The strengthened cooperation in capital, industrial and technology will further promote the high quality development of YTO Express, according to Alibaba.

Industry experts said concrete details are needed to transform their collaboration from capital to business, and further strengthen their respective competitiveness.

“The deepening of collaboration between Alibaba and YTO Express, which started more than a decade ago, will leverage YTO Express’ expertise in air cargo and distribution. And it will also accelerate Alibaba’s establishment of a logistics system to match its scale of e-commerce business,” said Kuang.

He added the purchase of YTO Express’s stakes at a price that is more than 4 percent higher than its closing price is proof of Alibaba’s confidence in the courier’s future development.

Last Tuesday, YTO Express stock closed 0.38 percent up in Shanghai at 15.79 yuan per share.

The stock price of YTO Express soared by the daily limit of 10 percent, closing at the 52-week high of 18.37 yuan per share last Wednesday, September 2.

Despite the stake transfer, Shanghai YTO Dragon Investment Development (Group) Co Ltd, the parent company of YTO Express, will remain the controlling shareholder.

YTO’s founding couple, Yu Weijiao and his wife, are still the actual controllers of the firm with a more than 41 percent stake in the listed company.

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