Alibaba’s logistics arm Cainiao will enhance its overseas presence with proposed buyout of local rival Best
- Alibaba and its logistics arm Cainiao are part of a consortium that has made a ‘preliminary non-binding proposal’ to buy out Best
- Analysts say domestic logistics players are eyeing opportunities in new retail and e-commerce trends to meet global demand
Alibaba and its logistic arm Cainiao are part of a consortium that has made a “preliminary non-binding proposal” to buy out Best, offering to purchase all outstanding shares in the company for US$0.144 per ordinary share, or US$2.88 per American Depositary Share. Alibaba and Cainiao are existing investors in Best.
The offer for the New York-listed company, made public by Best on Monday, would be worth about 415 million yuan (US$57 million), based on 397.6 million ordinary shares outstanding disclosed in August. However, Best said that there is no guarantee of a definitive offer or a finalised transaction at this stage.
Founded in 2007, Best is a big player in the logistics sector in China and Southeast Asia. After selling its express delivery business in China to rival J&T Global Express for around 6.8 billion yuan in 2021, Best has since relied on freight, supply chain management and its global logistics services as its three main revenue streams.
“The international business of Best has plenty of possibilities,” said Zhang Yi, chief executive of iiMedia Research. “With logistics players facing cutthroat competition in China, many domestic players are eyeing opportunities in new retail and e-commerce trends to meet global demand.”
Best’s global business saw cross-border volume jump by 54 per cent in the second quarter compared to the first three months of 2023, the company reported in August.
Cainiao has been doubling down on overseas operations after it saw revenue from international logistics exceed its domestic business, according to its initial public offering (IPO) prospectus. It recorded more than 1.5 billion cross-border e-commerce parcel deliveries in its recent financial year to March, making Cainiao one of the world’s top logistics services providers.
The proposed buyout from a consortium including Cainiao, one of six units being spun off from Alibaba amid a group-wide restructuring, comes after it filed in September for a Hong Kong IPO that could raise more than US$1 billion.
“Cainiao is at a crucial juncture in its IPO plan, and its success will be an important barometer for Alibaba’s transformation,” said Zhao Xiaomin, chief executive of Guoshuo Capital and an expert in the logistics industry.
“The focus is on whether and how Alibaba will integrate Best’s freight and international businesses into Cainiao,” Zhao said, adding that it would face challenges, including debt and loss mitigation risks.
Best reported 7.7 billion yuan in revenue in 2022, down 32 per cent from the previous year, and recorded a net loss of 1.5 billion yuan in 2022 compared with net income of 262 million yuan in 2021.
Best’s performance has improved this year with year-on-year revenue growth of 11 per cent to 2.1 billion yuan in the second quarter. Its net loss narrowed to 145.4 million yuan in the quarter from 305.4 million yuan in the same period last year.
