JD.com’s logistics unit set to sell shares through Hong Kong IPO

JD Logistics’ application comes more than two months after JD Health raised US$3.5 billion in its maiden share offering in Hong Kong in December
JD.com will continue to indirectly hold more than 50 per cent of the stock in JD Logistics

JD.com

Cheryl Arcibal

Published: 11:06pm, 16 Feb 2021

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The logistics unit of Chinese e-commerce giant JD.com is set to sell its shares through an initial public offering (IPO) at the Hong Kong stock exchange.

JD Logistics’ application to the local bourse on Tuesday came more than two months after JD Health raised US$3.5 billion in its maiden share offering in December. Its Beijing-based parent raised US$4.5 billion in a secondary listing in Hong Kong in June. The flotation was the city’s biggest fundraising event last year.

“(JD.com) intends to spin off JD Logistics by way of a separate listing of the JD Logistics shares on the main board of the Hong Kong stock exchange. The company submitted a spin-off proposal to the Hong Kong stock exchange … [the] exchange has confirmed that the company may proceed with the proposed spin off,” JD.com said in a filing late on Tuesday.

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Once the spin off is complete, JD.com “will continue to indirectly hold more than 50 per cent of the shareholdings in JD Logistics and, therefore, JD Logistics will remain a subsidiary of the company”. It currently owns 79.12 per cent of JD Logistics.

The market appeared to be cheering the news on Tuesday. JD.com’s shares were trading higher on the Nasdaq in New York.

Several banks have submitted proposals to help the logistics company raise capital in what is likely to be one of the largest equity sales this year, as reported by the Post in December.

JD Logistics’ value to the e-commerce firm was highlighted during Singles’ Day, the world’s largest shopping extravaganza, held between November 1 and 11 last year, when shoppers shelled out a record 271.5 billion yuan (US$42 billion) on JD.com. JD Logistics competes with Cainiao, the logistics unit of this newspaper’s owner, Alibaba Group Holding.

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JD Logistics operated more than 800 warehouses in China, with an aggregate gross floor area of about 20 million square metres as of September 30. Since October 2018, it has delivered parcels to consumers across China. It also has an agreement with China Railway Corporation to use the country’s high-speed train network for same-day delivery of high-end goods across the country, with JD Luxury Express making the last-mile delivery.

Logistics and other services have steadily accounted for a larger portion of JD.com’s revenue, rising from 1.4 per cent in 2017 to about 4.1 per cent, or 23.5 billion yuan, in 2019, according to its annual report for the year, the latest report available. This segment rose 73 per cent to 10.4 billion yuan in the third quarter last year, or about 6 per cent of its overall revenue in the period.

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In August, JD Logistics said it would roll out 100 unstaffed vehicles in Changshu city in Jiangsu province and have up to 100,000 of these “autonomous robots”, which look like minivans, on the country’s streets within five years. The company raised US$2.5 billion from third-party investors by issuing Series A preferred shares in 2018, giving them about 19 per cent of the company.

Global trends also support the company’s prospects. Logistics is one property segment that has seen an uptake amid a coronavirus-triggered global downturn. The faster adoption of e-commerce has boosted the appeal of logistics properties as the supply deficit grows, especially in markets with large populations, according to M&G Real Estate.

Offices, logistics and industrial assets as well as data centres were the top three asset classes to invest in 2021, according to a report by real estate consultancy Colliers International, based on a survey of 74 investors in 18 cities in Asia-Pacific, released late last year. The number of real-estate funds targeting the logistics sector has also doubled over the past five years, according to CBRE.

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