Alibaba acquires logistics business, to spend $15 billion on network expansion - Alldamoney

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Alibaba acquires logistics business, to spend $15 billion on network expansion

Alldamoney -   Alibaba Group in a recent announcement said it plans to invest US$15 billion (100 billion yuan) over the next five years, underpinning an aggressive overseas expansion to strengthen its global logistics network after becoming the controlling stakeholder in its affiliate logistics arm Cainiao Network.

The company said in a statement on Tuesday it has agreed to increase its stake in Cainiao Smart Logistics Network Ltd. to 51 percent, though the company did not elaborate on the division of shares among the other investors or reveal who holds the remaining three board seats after its latest fund injection. The deal  will make  Alibaba  consolidate Cainiao’s financials into its own books, eroding Alibaba’s bottom line, and will get an additional seat on Cainiao’s board, taking its representation to four out of seven seats.

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Cainiao was founded in May 2013 by a consortium of companies that include Intime, Fosun, Forchn as well as four Chinese express couriers – STO Express, YTO Express, ZTO Express and Yunda Express in partnership with Alibaba.

The little-known but rapidly growing business sits at the heart of Alibaba’s expansion both in China and abroad. It oversees a coterie of more than a dozen shipping partners, orchestrating deliveries carried out by about 2 million people across more than 600 cities. Cainiao’s operation had enabled Alibaba to maintain what it called an asset-light model that eschewed expensive warehouse construction.

Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen on the deal said “They’re realizing that it’s much more capital-intensive than they expected to build this out, Right now they are essentially obligating themselves to report profit and loss on the income statement every quarter, which they probably should have been doing.”

Cainiao confirmed in March 2016 that its maiden external funding  from Singapore’s Temasek ,GIC, Malaysia’s Khazanah Nasional and China’s Primavera Capital  without disclosing its valuation or the amount of the funds .

Chinese logistic firms reportedly haven't fared well in recent public listings despite attracting billions of dollars from equity investors.

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