Fosun looks to reap the gains of its early investment in logistics giant Cainiao with a US$1.3 billion stake sale to Alibaba

The Chinese conglomerate plans to sell its Cainiao stake to Alibaba and other investors
E-commerce giant Alibaba is upgrading its logistics network globally

Mergers & Acquisitions

Alison Tudor-Ackroyd

Published: 1:39pm, 24 Jun 2020

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Fosun International, one of China’s biggest private sector conglomerates, is set to sell its 6.7 per cent stake in logistics firm Cainiao to Alibaba Group Holding and other investors for around US$1.3 billion, according to a person familiar with the matter.

Shanghai-based Fosun, which owns the ClubMed resorts, the French fashion brand Lanvin and the Canadian troupe Cirque do Soleil among other assets, was an early investor in Cainiao with a 500 million yuan (US$70 million) investment in 2013. The conglomerate is keen to lock in a profit, and plans to reinvest the capital into the health care and consumer industries, said the person familiar with Fosun’s plans, declining to be named.

A deal is likely to be struck at a valuation for Cainiao of around US$20 billion, which may be below the market-clearing level for the logistics company but still rewards Fosun with a handsome return on its investment, the person familiar said.

For its part, Alibaba is keen to draw Cainiao - a Chinese colloquialism for a “rookie” - deeper into its ecosystem as it seeks to upgrade its delivery capability. The coronavirus pandemic has underscored to the e-commerce giant how vital a reliable logistics network is to business continuity and ensuring customer satisfaction, particularly in far-flung parts of the world with patchy infrastructure.

A Cainiao robotic arm puts boxes on sorting robots. Photo: Zen Soo

In November, Alibaba invested an additional 23.3 billion yuan to increase its stake in Cainiao to around 63 per cent from about 51 per cent. Alibaba owns South China Morning Post.

Cainiao announced on Tuesday a three-year initiative to ramp up efficiency so it can deliver packages within 24 hours in China and 72 hours globally. The affiliate of Asia’s largest e-commerce platform said the company will invest at least 1 billion yuan in its logistic network to increase chartered flights, build warehouse facilities and expand partnerships with customs authorities around the world.

To benefit its merchants running 100,000 online stores, Cainiao plans to quadruple its chartered flights to 1,260 from 260 over the next nine months while airfreight delivery time will drop to three to five days from the current seven to 10.

In addition, Cainiao will double the floor space of its overseas warehouses over the next three years to 2 million square metres so that Chinese merchants can store their goods closer to customers, which will further speed up delivery times.

The company also said it will double down on its 72-hour delivery commitment for merchants using its warehouse network by optimising the logistics supply chain in over 500 counties and in 21 Chinese provinces.

Alibaba formed a consortium, including Fosun, in 2013 to build Cainiao to ensure fast delivery of packages. Fosun said in its 2015 annual report that it had invested 500 million yuan for a 10 per cent stake.

Guo Guangchang, chairman of Fosun International. Photo: Edmond So

Fosun’s chairman and co-founder Guo Guangchang said in April that the Chinese conglomerate would accelerate efforts to develop medical-related business to help in the global fight to contain the coronavirus pandemic. As an investor it regularly buys and sells companies.

Fosun announced on March 16 that its subsidiary Shanghai Fosun Pharmaceutical would partner with German next generation immunotherapy company BioNTech to develop mRNA vaccine, known as BNT162, to treat the Covid-19 respiratory disease. Fosun will invest US$50 million for the exclusive right to commercialise the vaccine in China.

The pandemic has been challenging for Fosun, which announced in February one of its biggest executive reshuffles in three years. The portfolio of companies it acquired in a global acquisition spree, including Portugal’s largest hospital chain, an insurer and the Da Vinci surgical robot, in addition to its high-profile tourism and leisure assets, have been hit by the economic turbulence.

The group has shut down some of its ClubMed facilities in China and Europe as part of efforts to stem the viral outbreak, while the Cirque to Soleil entertainment group has decided to lay off 95 per cent of its staff amid production cuts.

Additional reporting by Peggy Sito

This article appeared in the South China Morning Post print edition as: Fosun eyes profit after US$1.3b sale of Cainiao stake

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