Alibaba Confirms IPO Plan for Cainiao Logistics Arm as Restructuring Moves Ahead

Alibaba has confirmed plans to pursue an initial public offering for its Cainiao logistics unit as the Chinese e-commerce group pushes forward with a restructuring plan announced in March.

Alibaba, which owns 67 percent of the equity in Cainiao Smart Logistics, said in a release late last week that its board of directors had signed off on exploring an IPO to be completed in the next 12 to 18 months. Cainiao provides supply chain, logistics and delivery services to consumers and merchants that are clients of Taobao, Tmall and Alibaba’s international digital commerce group, as well as third-party customers.

The Hangzhou-based company co-founded by billionaire Jack Ma also revealed plans to raise fresh external capital for the digital commerce group and to carry out an IPO of the Freshippo grocery retail business, with the latter deal to take place within the next 6 to 12 months.

“We are delighted to share that our board has approved the process to start external financing for Alibaba International Digital Commerce Business Group; exploration of IPO for Cainiao Smart Logistics Group; and execution of IPO for Freshippo,” said Toby Xu, chief financial officer of Alibaba Group.

Potential $2B Cash Raise

No details were provided about the size of Cainiao’s potential IPO, but Reuters reported earlier this month that the logistics arm was looking to raise up to $2 billion via a Hong Kong listing as soon as early 2024. The agency cited three sources with knowledge of the plan.

Revenue generated by Cainiao after inter-segment elimination — which strips out figures for services provided to other Alibaba businesses — reached RMB 55.7 billion ($8.1 billion) in fiscal 2023 ended in March, up 21 percent from the previous year, Alibaba said. The increase was attributed to greater revenue from international fulfilment services and a “service model upgrade” since late 2021 whereby Cainiao took on more responsibilities throughout the logistics process to better serve customers and enhance their experience.

In terms of adjusted earnings before interest, tax and amortisation, Cainiao recorded a loss of RMB 391 million ($57 million) for the fiscal year, narrowing from RMB 1.5 billion a year earlier, according to Alibaba, which as a group posted $126.5 billion in revenue, up 2 percent, and adjusted EBITA of $21.5 billion, up 13 percent.

Established in 2013 and led by Joe Tsai, the Taiwan-born Canadian businessman and Alibaba co-founder, Cainiao aims to deliver anywhere in China within 24 hours and across the globe within 72 hours. Tsai continues to serve as chairman of Cainiao and executive vice chairman of Alibaba, in addition to performing his duties as the owner of US sports franchises including basketball’s Brooklyn Nets.

Reuters reported last November that Fosun International, the cash-strapped Chinese conglomerate chaired by Guo Guangchang, was seeking to offload its stake of less than 5 percent in Cainiao in a deal that could fetch up to $1 billion.

Choppy Waters for Listings

The news of Cainiao’s planned IPO comes at a fraught time for Hong Kong listings, after the HKEX turned in one of the worst showings among global bourses in 2022 and the exchange’s biggest IPO of 2023 — KKR-backed baiju distiller ZJLD — flopped in its April debut.

China’s largest commercial developer, Dalian Wanda, failed for a third time to achieve a Hong Kong listing of its Zhuhai Wanda Commercial Management Group after the mall unit’s IPO application was updated to invalid in April. The cancellation came after the planned listing had attracted the scrutiny of mainland regulators questioning the deal’s soundness in light of Wanda’s debt obligations.

In late March, JD.com filed for two IPOs in Hong Kong as the Chinese e-commerce heavyweight laid the groundwork to spin off its property and industrial services units. JD.com holds respective stakes of 75 percent and 78 percent in Jingdong Property and Jingdong Industrials and intends to continue owning a majority interest in each publicly listed firm.