Alibaba-Backed Courier To Go Public

March 23, 2016, 6:32 AM UTC
Packages are piled up in a small shop's Cainiao service
BEIJING, CHINA - 2015/11/08: Packages are piled up in a small shop's Cainiao service station - the logistics affiliate of Alibaba, which offers a special arrangements of delivering goods in less than two hours for this year's Double 11 holiday. November 11 (also referred to as Double 11) is popularly described as 'China's anti-Valentine's Day' and the world's biggest 24-hour online shopping event, first launched by Alibaba and followed by other e-commerce players like According to a new survey, 56 percent of more than 1,000 internet users in China said they would increase spending compared with 2014. (Photo by Zhang Peng/LightRocket via Getty Images)
Zhang Peng — LightRocket/Getty Images

Alibaba-backed YTO Express plans to go public via a 17.5 billion yuan ($2.7 billion) merger with a listed clothing maker, becoming the latest courier seeking capital market funds to stay competitive during China’s e-commerce boom.

China’s mostly privately held express delivery firms are under pressure to spend heavily on logistics infrastructure and service upgrades to retain market share as tech firms such as Alibaba Group Holding propel the country’s fast-growing e-commerce market.

“The (express delivery) industry has entered a phase of reorganisation and upgrading,” said Essence Securities analyst Jiang Ming.

“Right now the firms aren’t very different in terms of service standards. So if one wants to make upgrades, differentiate themselves, this will require large investments.”

Clothing maker Dalian Dayang Trands Co. said in an exchange filing on Tuesday it would buy YTO Express through an asset swap and share issue, resulting in a backdoor listing on the Shanghai bourse for the courier.

Dayang Trands said it will transfer its assets to YTO Express’ shareholders under the deal. As a result of the transaction, which will require regulatory approval, the shareholders will ultimately own Dayang Trands, it said. YTO did not reply to requests for comment on Wednesday.

YTO’s deal follows that of rival Shentong (STO) Express, which announced a 16.9 billion yuan reverse takeover with a Shenzhen-traded valve maker in December.

Such back-door listings are becoming popular due to the lengthy waiting time involved in China’s initial public offering (IPO) process. STO Express is still waiting for regulatory approval and that decision could indicate whether YTO’s deal will go ahead, said analyst Jiang.

“STO Express was the first … Now other companies are frightened and are accelerating their stock market listings,” he said.

Rival SF Express in February posted a notice in a Shenzhen newspaper saying it was being advised by CITIC Securities, China Merchants Securities and Huatai United Securities on a potential stock market listing.

Also last month, Thomson Reuters publication IFR reported that ZTO Express was planning an up to $1 billion IPO this year in Hong Kong.

With low barriers to entry, express couriers proliferated rapidly over the past decade to more than 8,000 firms, squeezing profit margins to about 5% from 30% 10 years ago, according to analysts.

The sector grew around 50% each year between 2010 and 2014, data from the State Post Bureau showed.

YTO, which was founded in 2000, inked net profit attributable to shareholders of 717 million yuan in 2015, down from 747 million yuan in the previous year.


Alibaba and Yunfeng Capital, a fund backed by Alibaba’s founder Jack Ma, own a stake in YTO Express through a strategic investment deal announced in May last year.

Dayang Trands’ announcement on Tuesday came after China’s markets closed. The company has suspended trading in its shares since early January citing potential major asset restructuring.