Alibaba Invests RMB 23B to Boost Stake in Cainiao Logistics Network

Alibaba has invested RMB 23.3 billion ($3.3 billion) in logistics affiliate Cainiao, raising its equity in the warehousing and shipping company from 51 percent to 63 percent.

The e-commerce giant said in a statement that the additional 12 percent shareholding was acquired partly by purchasing newly issued ordinary shares, and partly by acquiring an undisclosed equity interest from an existing Cainiao shareholder.

Alibaba’s fresh injection of capital comes two years after the e-commerce giant paid RMB 5.3 billion to increase its stake in Cainiao from 47 percent to 51 percent as part of former Alibaba CEO Jack Ma’s masterplan of developing a smart logistics network.

“We are committed to supporting [Cainiao’s] ongoing development, to realizing greater synergies throughout the entire Alibaba Economy and accelerating digitisation of the logistics industry,” said Alibaba’s CEO Daniel Zhang, who became CEO of Cainiao at the same time that he became executive chairman of Alibaba last year.

According to local Chinese media reports, Cainiao will use the capital to invest in technology that will allow the company to improve its smart logistics network.

Zhang added that logistics is an integral part of Alibaba’s ability to deliver top-tier customer service and provide seamless online and offline shopping.

Alibaba Tightens Its Grip on Logistics

The investment in Cainiao, which reported a 48 percent jump in revenue to $680 million in the third quarter, comes as Alibaba doubles down on its goal of fulfilling orders in China within 24 hours and within three days in other parts of the world.

A key component of Alibaba’s e-commerce infrastructure, Cainiao links up warehouses, deliveries and drivers with digital technology, holding together the logistics side of Alibaba’s e-commerce platforms.

The e-commerce giant founded the company nine years ago together with department store chain Intime Retail Group and industrial conglomerate Fosun International to develop new technology including tracking systems that would transform the industry at a time when logistics in China was relatively undeveloped.

Alibaba has been tightening its grip on the sector in China in line with Ma’s announcement in May last year that the group would invest RMB 100 billion in logistics over the next five years.

Just nine months ago, the e-commerce giant purchased a 15 percent stake in delivery company STO Express for $700 million, while the Hangzhou-based firm last year paid $1.38 billion to acquire ten percent of New York-listed courier ZTO Express, one of the major logistics providers to Alibaba in mainland China.

Alibaba also owns 11 percent of Shanghai-based express delivery company YTO and 28 percent of Hangzhou-based supply chain service provider Best Logistics.

Singles Day Orders Hit RMB 84B

Alibaba bumped up its interest in Cainaio just three days before China’s Singles Day, the shopping festival which the company has helped to enshrine as the world’s leading sales promotion.

The company’s sales reached RMB 10 billion in the first minute and 36 seconds of the event on November 11th, clocking RMB 84 billion in the first hour — up 22 percent from last year’s opening 60-minute haul of RMB 69 billion.

By the end of the day, Alibaba had received 1.3 billion orders and sold RMB 268 billion in goods — an increase of 26 percent on last year’s performance.

The Hangzhou-based e-commerce giant posted second quarter revenue of RMB 119 billion last week, up from RMB 85.1 billion a year ago, which was unexpected given the slowdown in the domestic economy this year.

The company plans to raise as much as $15 billion in a secondary listing in Hong Kong with a share sale planned for the final week of November, according to a report by Nasdaq citing people familiar with the matter.