Best Inc could become a top delivery firm after its US IPO

The express delivery firm is aiming to raise US$750 million in the IPO that will be used for corporate purposes

PUBLISHED : Tuesday, 27 June, 2017, 9:26pm
UPDATED : Tuesday, 27 June, 2017, 10:59pm

Alibaba-backed logistics firm Best Inc has joined the fray against the mainland’s five largest express delivery firms with its initial public offering (IPO) plan in New York, and whose rapid growth is set to redraw the business landscape of a booming domestic e-commerce sector.

Best, formerly known as Best Logistics Technologies, aims to sell shares worth US$750 million in the United States, becoming the latest mainland delivery company to go public, according to a Securities and Exchange filing.

The fundraising plan came after Best, in which Alibaba Group has a 23.4 per cent share, reported sizzling business growth for 30 consecutive months, which could put it in a better position to pit against the five dominant players – SF Express, YTO Express, STO Express, ZTO Express and Yunda Express.

The company said the proceeds of the IPO would be used for general corporate purposes.

Alibaba is the owner of the South China Morning Post.

China’s big five parcel delivery companies seek to raise funds ahead of consolidation wave

“Overall, the express delivery market in China will continue to grow, but Best is emerging to be a dark horse that will outgrow its rivals, banking on its financial strength,” said Zhao Xiaomin, an angel investor and independent researcher in China’s logistics sector.

“It is likely to make the list of the country’s top three delivery companies soon.”

Overall, the express delivery market in China will continue to grow, but Best is emerging to be a dark horse that will outgrow its rivals, banking on its financial strength
Zhang Xiaomin, investor and researcher

Best, despite posting a loss of US$198 million for 2016, saw its revenue from parcel delivery segment for the first quarter of this year jump 114 per cent to US$304 million.

The five largest delivery companies completed their listing processes recently as they revved up expansions to profit from the buoyant demand for express delivery, a result from the increasing penetration of online shopping in the world’s most populated market.

Best, founded by Johnny Chou, a former greater China president of Alphabet Inc’s Google in 2007, received US$750 million from a clutch of investors including Citic Private Equity and Goldman Sachs in its latest round of financing last September.

The company warned that its costs would continue to increase, extending its trend of losses.

Zhao expected it to make profits in 2019.

Chinese express delivery sector is striving to improve operating efficiency, avoid price wars, and fine-tune services to clients in a US$1.6 trillion logistics market.

According to consulting firm iResearch, express delivery is expected to grow at an annualised 22.8 per cent pace between 2016 and 2021 in terms of parcel volume.

“Go-digital will be the name of the game in delivery business because the technologies not only help them find clients promptly, but help them better serve the customers,” said Gilbert Zhou, a senior executive with Fuyang Group, a Shanghai-based trading company that also invests in logistics businesses.

Go-digital will be the name of the game in delivery business because the technologies not only help them find clients promptly, but help them better serve the customers
Gilbert Zhou, Fuyang Group

Best’s listing plan came after a spat between Cainiao Network Technology, the logistics affiliate of Alibaba and SF Express over a data-sharing issue earlier this month.

Cainiao, partnering with the country’s top delivery firms, coordinates the deliveries of consumer goods and handles the data of transactions on its shopping platforms Taobao and Tmall.

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