Suning Acquires TTK Express At ¥4.25 Billion, Alibaba Might Be The Biggest Winner

摘要: Alibaba would continue to penetrate express companies, serving as supplements to Jack Ma’s so called new retail.

(Chinese Version)

Recently, Suning Commerce Group’s subsidiary Jiangsu Suning Logistics has announced the full acquisition of TTK Express’s stocks, a express company valued at ¥4.25 billion. According to the retail giant’s announcement on the acquisition, the acquisition will be completed in two rounds. On December 30th 2016, Suning poured in ¥2.975 billion to acquire 70% of TTK Express’s stocks. The agreement says the acquisition of the other 30%, priced at ¥1.275 billion, will be completed within 12 months after the transaction.

In this deal, TTK Express’s whole stocks are valued at ¥4.25 billion in total. TTK Express’s expected revenue in 2016 after taxation will be no lower than ¥84 million.

Suning Commerce Group claimed in the statement that the company’s express service of the last one kilometer will be further strengthened and integrate the two express teams’ express resources on inventory and the tail-end etc.

On November 1st last year, Suning Yuncang stepped into the public’s attention official. Its inventory scale, daily shipment, and automation level etc. all break the records of the Asian express industry. In early December, Suning announced the establishment of the express research center and S Lab, pouring over one hundred million of RMB into developing smart technologies. Suning now owns eight major national express centers, 47 regional express centers, 365 city delivery centers and 6,267 tail-end delivery centers.

The acquisition target, TTK Express, has express distribution centers in over 300 prefecture-level cities and 2,800 counties (including county-level cities and districts), over 10,000 delivery centers, and over 1,800 operation lines. At present, TTK Express can provide provincial next-day delivery service in most provinces and cross-province next-day delivery in some provinces. In East, South and North China, regional next-day delivery service is available. 48-hour delivery service is available in the economic zones mentioned above. Besides that, TTK Express has established e-commerce warehouses and professional inventories in node cities, providing warehouse and distribution service. The express company has set up international warehouses in 7-8 countries and three cross-border warehouses in China. The warehouse and distribution system now handles a shipment volume of more than 200,000 every day.

The Q3 fiscal report of Suning Commerce Group in 2016 shows Suning Commerce Group achieved a year-on-year income growth of 411.11% in express through accelerating the socialization of its express and basing on service providers and Cainiao’s business. At present, there are over 1000 companies connected to Suning’s express system. Suning provides warehouse and distribution service.

TTK Express didn’t choose to go public like other express companies such as Yunda Express, STO Express, YTO, and ZTO etc. “The competition is too fierce for us to do that,” TTK Express said. Before this acquisition, TTK Express had announced the plan to go public before. On June 17th 2016, TTK Express announced via its WeChat official account that the company had set up a listing preparation team in March and was planning to select a listing approach in late August, and that the company would go public in mid December through listing or a shell.

TTK Express’s executive vice president Chen Xiangyang told iWshang: “Going public would mean we are once again following the path of other express companies such as YTO. The competition will be fierce. But the truth is TTK Express doesn’t have a matching scale to combat in such battle. It’s very hard for us to compete with these express giants.” From Chen Xiangyang’s perspective, going public might not be a good way out for TTK Express.

“E-commerce is developing fast and express companies’ main business is 2B, which is meeting businesses’ demands. The competition in this industry is very fierce,” Chen Xiangyang said. “TTK Express is late comer with a relatively small scale. To find a place in the future express sector, we have to focus on the 2C sector.”

Aside from all that, Alibaba, who has been pulling the strings, might be the biggest winner of all in this acquisition.

An anonymous insider source revealed that Alibaba’s board chairman Jack Ma and Suning Group’s president Zhang Jindong has made out a blueprint for TTK Express’s future development: Suning Commerce Group. Suning Yigou, and TTK Express will form a joint venture, which will go public in three years.

The insider also said that Alibaba has played a major role in this acquisition. “In this acquisition, Alibaba has been pulling a lot of strings, helping the acquisition work out,” the source said. Alibaba is the second biggest shareholder of Suning. Both companies have been cooperating with each other in several fields.

Zhao Xiaomin, investor of the express sector, express industry expert, told Bloomberg that Alibaba would continue to penetrate express companies, serving as supplements to Jack Ma’s so called new retail.

It’s foreseeable that Suning Commerce Group and Alibaba will deepen their cooperation on logistics. On August 10th 2015, Alibaba and Suning Commerce Group announced a comprehensive strategic cooperation. Alibaba poured in about ¥2.83 billion to participate Suning Commerce Group’s private placement, accounting for 19.99% of the total stock after the placecment, making Alibaba the second biggest shareholder of Suning Commerce.

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[The article is published and edited with authorization from the author @TMTPost, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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