07 December 2016

Chinese couriers sort through M&A, IPOs in 2016

Black Friday. Cyber Monday. Singles’ Day. (For those not in the know the latter being not just the largest single-day e-commerce retail event in China but, reportedly, the largest globally). Also, do not forget the run-up to Christmas when some consumers forego traditional brick-and-mortar shopping for the ease of clicking and buying presents from the comfort of a couch.

The express delivery sector is driven by this fast-growing e-commerce market – think of powerhouses such as Amazon and Alibaba, with the latter announcing Chinese consumers bought more in the first hour of Singles’ Day (11th November) this year than the entire 24 hours in 2013. 

Do not forget smaller players either. Baozun is a Cayman Islands-registered end-to-end e-commerce services provider which is headquartered in Shanghai and, incidentally, backed by the titan that is Alibaba. It recently announced it handled 4.60 million orders during Singles’ Day, compared to its daily average of 41,000 generated in the first nine months of 2016, and the 2.70 million and 1.10 million orders placed on Singles Day in 2015 and 2014, respectively.

So what next? Once the picking and packaging of the gifts at the warehouses and fulfilment centres is done, then couriers step into the breach to do the leg work, of course, and China’s express delivery players are bulking up their presence in an attempt to take a larger slice of what is reportedly the world’s largest express delivery segment, with total parcel volume amounting to roughly 20.70 billion in 2015, but which is also at an earlier stage of development when compared to established markets such as the US.

So, on one hand there are the local express delivery service providers falling under the network partner model, and the top four are currently billed as ZTO Express, STO Express, YTO Express and Yunda Express. On the other you have a direct business structure favoured by the likes of China Post subsidiary EMS and SF Express. But do not forget global operators such as FedEx or UPS, which also partner with domestic players for logistics in China.

According to Zephyr, the M&A database published by Bureau van Dijk, companies operating within the courier and express delivery sector have announced 112 global mergers and acquisitions (M&A), including biggest initial public offering (IPOs), so far this year, and the largest by value involved Maanshan Dingtai Rare Earth & New Material entering the industry by taking over SF Holding – known as SF Express – as part of a USD 6.61 million deal which gave the courier a backdoor listing. 

While Chinese reverse takeovers represented the top three deals, ZTO Express accounted for the IPO after carrying out a listing worth USD 1,406 million on the New York Stock Exchange via a Cayman Islands-incorporated entity and is currently worth USD 9,859 million in the markets, despite shares slipping from its IPO price of USD 19.50 at the end of October to USD 13.48 yesterday. 

In fact, despite the fact there are still three weeks left of 2016, the annual value of global M&A, including IPOs, in the courier and express delivery sector has already reached a record high of USD 17,610 million, with Chinese companies being the driving force behind figures after signing off on USD 13,509 million-worth of deals in the year to date, followed by those based in the Cayman Islands tax haven.

At the other end of the scale, startups have sought private equity and venture capital investment this year to jumpstart their entry into the sector, including Tian Tian Express (USD 93 million), UC Express (USD 45 million) and Shanghai Fast Express (USD 38 million).

It remains to be seen if growth, supported by an increase in demand for e-commerce, business-to-consumer, and cross-border trade, will continue into 2017 and beyond.

© Zephyr