Caixin
Aug 01, 2019 08:45 PM
BUSINESS & TECH

Alibaba Offered Controlling Stake in Logistics Firm for $1.4 Billion

Workers an an STO Express warehouse in Jiashan, East China's Zhejiang province on Nov. 12. Photo: VCG
Workers an an STO Express warehouse in Jiashan, East China's Zhejiang province on Nov. 12. Photo: VCG

Alibaba Group Holding Ltd. has signed a deal to increase its stake of a domestic logistics service operator as the e-commerce giant continues to add delivery capacity.

Alibaba was granted the option to acquire a 31.35% stake in STO Express Co. Ltd. within three years, according to STO Express’s statement (link in Chinese) filed to the Shenzhen Stock Exchange on Wednesday. The deal would cost a total of 9.98 billion yuan ($1.45 billion), according to the statement.

The offer would deliver Alibaba a controlling stake of 46% in the logistics company, up from 14.65%. Alibaba gained its current share through a 4.66 billion yuan deal in March. That was a bid to reduce its logistics costs, the company said then.

With Chinese consumers hooked on online purchases and services that deliver to their doorsteps, e-commerce giants are increasingly teaming up with logistics companies to expand their express delivery networks.

Founded in 1993, Shanghai-based STO Express is one of China’s five major courier services. It had a 10% share of the domestic market last year, trailing ZTO Express (Cayman) Inc. at 17%, Shanghai Yunda Express Co. Ltd. at 14%, YTO Express Group Co. Ltd. at 13% and Best Inc. at 11%, according to the companies’ financial reports.

Alibaba has invested in all of those companies except for Yunda Express.

In 2013 Alibaba launched Cainiao Network Technology Co. Ltd., a logistics company that matches riders, deliveries and warehouses for independent third-party merchants on its vast e-commerce platforms Taobao and Tmall.

Alibaba’s reliance on third-party courier services puts it at a logistical disadvantage compared to its largest domestic rival, JD.com Inc., which generates most of its business by selling products directly to consumers and packages and ships goods itself from its own massive warehouses.

JD.com spun off its delivery platform into JD Logistics in April 2017, and more recently began offering customers a package courier service.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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