With eye on Asia’s growing online retail sector, JD.com buys US$306 million stake in logistics company ESR
China’s second-largest logistics company, ESR owns and operates more than 10 million square metres of warehouse space across China, Japan, Korea and India
JD.com, China’s second-largest e-commerce company, announced a US$306 million investment in pan-Asian logistics real estate company e-Shang Redwood (ESR) on Tuesday, in a move that will further expand its reach across Asia’s fast-growing online retail landscape.
ESR is China’s second-largest logistics company. It owns and operates more than 10 million square metres of warehouse space across China, Japan, Korea and India, with US$12 billion worth of assets under management. The company also has a presence in Singapore and Australia.
“This investment in ESR will further strengthen our relationship to solidify and expand our logistics networks. We look forward to working closely, and together we will continue to expand the ecosystem to bring values to our customers and business partners,” said Zhenhui Wang, the chief executive of JD Logistics, a subsidiary of JD.com headquartered in Beijing that made the investment.
Jeffrey Shen and Stuart Gibson, the co-chief executives of ESR, said: “We are very excited to have JD.com become a long-term shareholder of the company. This move demonstrates JD’s vote of confidence in our team, vision and growth strategies. Leveraging JD’s network and smart supply chain capabilities, together with ESR’s exceptional penetration in both developed and emerging markets across Asia-Pacific, this strategic alliance is poised to capitalise on megatrends in the region.”
JD.com’s stake in ESR was not disclosed, but in terms of ownership it will be “on the smaller side”, according to a source close to the deal.
“From JD’s perspective, this was a very logical partnership,” the source said. “Having a trusted development partner, who can help build the core infrastructure JD needs to succeed, would be viewed as a competitive advantage over their peers in the longer term.”
ESR was formed out of a January 2016 merger between Shanghai-based developer e-Shang Cayman and Singaporean logistics fund manager Redwood Group Asia, to become one of Asia’s biggest logistics players. E-Shang was co-founded by New York-based global private equity company Warburg Pincus in 2011. It secured US$300 million in funding from a consortium of mainland Chinese developers in January 2017, ahead of an expected initial public offering the same year that was not launched in the end. Its other investors include asset manager APG, Goldman Sachs and Ping An Insurance.
In April, a JD.com subsidiary also bought a 10 per cent stake in China’s second-biggest logistics company, China Logistics Property Holdings, for HK$898.99 million (US$114.55 million) through the Hong Kong stock exchange.
This investment in ESR will further strengthen our relationship to solidify and expand our logistics networks
JD.com, which is listed on the Nasdaq, has been struggling to get ahead of competitors in China’s oversaturated online retail market, which include the Alibaba-owned platforms Taobao and Tmall.com. Alibaba also owns the South China Morning Post.
China’s e-commerce frenzy has pushed these online retail giants to develop and acquire logistics facilities and new business ventures in an attempt to sustain profits. Online retail sales in China reached a staggering US$307 billion in the first quarter of 2018, accounting for about a quarter of total retail sales, according to government data.
JD.com will also expand further into financial services through an upcoming purchase of a third of Allianz China’s general insurance business for 537 million yuan (US$85.4 million). It has also recently made forays into online real estate by partnering with international property listing site Juwai.com in April.
JD.com narrowly beat analysts’ expectations when it posted 101.1 billion yuan (US$15.9 billion) in first-quarter revenue this year versus an estimated 98.9 billion yuan. But it was still the company’s slowest quarterly revenue growth since it listed in 2014, partly because of numerous investments in other areas, and a seasonally low sales period for the Chinese e-commerce market.
