JD.com ramps up China logistics expansion with US$432 million deal to acquire Kuayue Express

Subsidiary JD Logistics will acquire a controlling interest in Shenzhen-based courier services provider Kuayue Express
The deal was made weeks after JD.com bought a stake in Hong Kong-based supply chain manager Li & Fung for US$100 million

US-listed Chinese stocks

Minghe Huin Beijing

Published: 6:30pm, 14 Aug 2020

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Chinese online retail giant JD.com has agreed to buy a controlling stake in express transport firm Kuayue-Express Group Co for 3 billion yuan (US$432 million), escalating its efforts to transform into a major supply chain services and technology company.

The deal was made weeks after JD.com bought a stake in Hong Kong-based Li & Fung for US$100 million, a strategic partnership that marries a 21st century hi-tech platform with one of the world’s largest logistics and supply chain networks.

Subsidiary Jingdong Express Group Corp, known as JD Logistics, will acquire a controlling interest in Kuayue Express, a specialist in so-called “limited-time express service” in China, according to Nasdaq-listed JD.com’s statement on Friday. The transaction, which is expected to close this third quarter, involves a combination of buying existing shares and subscribing to newly issued shares of Kuayue Express.

“The cooperation between Kuayue Express and JD Logistics is expected to rewrite the current competitive pattern of China’s logistic market,” Shenzhen-based Kuayue Express said in a statement via its official WeChat account on Friday. It indicated that the collaboration “will perform like mortise and tenon, and have a perfect fit”, referring to the joint that woodworkers and carpenters around the world have long used to connect two pieces of wood.

Backed by Sequoia Capital, Kuayue-Express Group Co was established in Shenzhen in 2007 and now has more than 50,000 employees. Photo: Handout

JD.com’s latest deal shows the aggressive push being made by Chinese e-commerce players to broaden their logistics and transport infrastructure to meet fast-growing consumer demand, which has picked up pace this year amid the country’s coronavirus pandemic lockdowns and travel restrictions.

Sales of online retail channels in mainland China saw a 19 per cent increase in the first quarter from a year ago, while offline sales dropped by 13 per cent, according to a report by global consultancy Bain & Co.

“Collaborating with Kuayue Express advances our integrated supply chain management, technology initiatives and service expansion to third-party merchants,” said Wang Zhenhui, chief executive at JD Logistics.

Founded in 2007, Sequoia Capital-backed Kuayue Express has established an integrated transport network with more than 17,000 delivery vehicles that serve more than 500 cities as well as 13 freight charter aircraft.

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JD.com has always run its own logistics network to provide faster delivery of goods. The past several years, however, has seen rival Alibaba Group Holding build up its own transport and logistics capabilities. Alibaba is the parent company of the South China Morning Post.

Cainiao Network Technology Co, an Alibaba affiliate, has become the second largest cross-border cargo carrier in the world, with an average daily volume of about 2 million shipments. It plans to launch 1,260 chartered flights to safeguard cross-border logistics and help Chinese merchants sell globally. Last month, the company started offering 10 newly-opened international routes connecting various Chinese cities with overseas destinations that include Moscow, Liege, Riga, Siberia, Kuala Lumpur, New York, Madrid and Sao Paulo.

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