JD Announces Plan for Potential $5B Logistics IPO in Hong Kong

Warehouses could be the source of one of Hong Kong’s biggest initial public offerings again this year after JD.com late Tuesday announced plans to list its logistics unit on the city’s bourse.

The offering, which is backed by the e-commerce provider’s portfolio of more than 800 warehouses in China, is expected to value JD Logistics at as much as $40 billion, with the IPO potentially raising $5 billion, according to earlier media reports.

Regional logistics player ESR notched Hong Kong’s third-biggest IPO of 2019 with its $1.6 billion debut in October of that year, with the COVID-19 pandemic having since transformed logistics real estate into one of the world’s hottest asset classes.

JD Health, another spin-off from China’s second largest e-commerce provider (after Alibaba), recorded Hong Kong’s largest IPO of 2020 with its $3.48 billion market debut in December.

New Boss to Lead Listing

Plans for the offering are still in the early stages, with a Reuters report in December indicating that JD Logistics is expected to launch on the exchange during the first half of this year. Reports of the listing’s value have ranged from $2 billion up to $5 billion.

“JD Logistics Group’s business would be appealing to an investor base that pursues high growth opportunities in the supply chain solutions and logistics services business, which is different from the relatively more diverse business model of JD Group’s operations,” JD said in a statement to the exchange.

Banks involved in the offering have yet to be announced, with JD.com set to indirectly retain more than 50 percent of the shares in JD Logistics following conclusion of the sale.

JD named its former human resources head, Rui Yu as chief executive of JD Logistics in December of last year after CEO Zhenhui Wang resigned for personal reasons.

The company’s portfolio covered 20 million square metres (215 million square feet) of gross floor area as of 30 September 2020, according to a statement. For the three months ending 30 September JD.com reported revenue from logistics and other services of RMB 10.4 billion ($1.6 billion), which was a jump of 73 percent over the same period a year earlier.

That boost in revenue reduced JD Logistics loss attributable to shareholders to RMB 71.2 million over the first nine months of 2020, which was down from nearly RMB 1 billion over the same period a year earlier.

Mainland Heavyweights Head to Market

The IPO is likely to mean a pay-off for some of China’s best known investors, many of which invested in JD Logistics soon after it was established as a distinct division in April 2017.

In February of 2018 JD.com raised $2.5 billion by selling stakes in the fledgling warehousing unit to investors including Tencent, China Life, ICBC International, Sequoia China, Hillhouse Capital, China Merchants Group, China Development Bank Capital FOF and China Structural Reform Fund.

After that fund raising effort, JD retained 81.4 percent of the logistics venture.

In addition to developing its own properties, JD Logistics has been a prolific investor in third-party platforms, including paying $306 million for a share of ESR in 2018. In December of last year the company was reported to be among the lead bidders for CJ Group’s China logistics business, with the South Korean conglomerate expecting to make $1 billion or more on that disposal.