Hong Kong-listed China Logistics Property Holdings has reeled in a candidate for taking over the mainland warehouse operator, with market sources confirming to Mingtiandi that e-commerce giant JD.com has proposed buying a controlling stake of 26.38 percent in the company.
After CNLP’s stock shot up 13 percent on Thursday amid market buzz, trade was halted and the company issued a statement to the HKEX acknowledging that founder and chairman Li Shifa had been in talks with a potential purchaser of the stake. The prospective buyer was later identified by sources as JD, the Chinese e-commerce firm second only to Alibaba in market share.
Li and Hong Kong private equity firm RRJ Capital have sought to sell their combined 50 percent stake in CNLP since last December, aiming to value the company, which was once known as Yupei, at $2 billion. A 26.38 percent slice would be equivalent to about HK$3.62 billion ($460 million) of the company’s market cap on Friday, when shares eased 6.1 percent in resumed trading.
For JD, which is both an existing investor in CNLP and one of its largest tenants, the potential deal offers a pathway to beefing up its logistics network after the $3.2 billion Hong Kong IPO of its JD Logistics arm in May and the recent consolidation and expansion efforts of Asia Pacific warehouse powers ESR, GLP and Logos.
No formal agreements have been entered into by the parties, according to CNLP, which has 65 logistics parks with a combined gross floor area exceeding 6.2 million square metres (66.7 million square feet) across 45 cities in China. JD Logistics’ portfolio, meanwhile, spans 20 million square metres of gross floor area.
JD already holds about a 9.4 percent stake in China Logistics Property, and with the potential addition of the 26.38 percent stake from Li and RRJ, the $123 billion online shopping titan would hold nearly 36 percent of the warehouse developer. At that level of ownership, JD would be required under Hong Kong’s takeover code to make a general offer for the entire target company.
In addition to its stake in CNLP, JD Logistics has also been a prolific investor in other third-party warehouse platforms, including paying $306 million for a stake in ESR in 2018 before that firm’s 2019 debut on the Hong Kong exchange.
Last December, JD 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.
In its interim results released this week, JD Logistics reported a first-half net loss of RMB 15.2 billion (now $2.35 billion), citing changes in the fair value of convertible redeemable preferred shares and a reduction in benefits from pandemic-related government support.
Shed Market Tightening
JD may be feeling an urgency to scale up quickly and control its own real estate costs as industry consolidation in APAC’s warehouse sector threatens to accelerate an already rapid upswing in logistics rents.
Earlier this month, ESR announced that it had agreed to acquire Singapore’s ARA Asset Management for $5.2 billion, a deal that would bring Sydney-based Logos’s warehouse portfolio into the fold and boost ESR’s gross floor area of 20.1 million square metres by more than 44 percent.
For its part, Singapore-based GLP operates 60 million square metres of warehouse space in China at both self-developed and third-party facilities. The company backed by sovereign wealth fund GIC is reportedly considering a spinoff of its $4 billion mainland logistics portfolio in a Hong Kong REIT listing by the end of the year, aiming to raise between $1.6 billion and $2 billion.
By taking control of CNLP, JD could boost its warehouse portfolio by nearly a third without having to go through the increasingly competitive process of acquiring sites and doing development in China, market watchers told Mingtiandi.