Alibaba Acquires Major Stake In Chinese Courier Firm STO Express

Alibaba Group
Workers unload parcels from a truck at a distribution hub of the Chinese delivery company Shentong (STO) Express in Beijing (Photo: Reuters)

Alibaba Group Holdings Ltd is now planning to greatly enhance its logistical capabilities with the acquisition of a major stake in a leading Chinese delivery service provider. The e-commerce giant announced that it will be acquiring a major stake in the Shenzhen-based courier STO Express Co Ltd. The move is meant to allow the company to further expand the delivery footprint of its online and offline subsidiaries, which will in turn positively affect its bottom line.

According to the company's regulatory filing, Alibaba will be paying close to US$693 million to acquire a 49 percent stake in STO Express. The purchase will include the creation of a new unit that will have 29.9 percent control over STO as a whole. Following the news of the major stake acquisition, stock prices of the Shenzhen-listed courier service jumped by almost 10 percent. STO announced that it is willing to fully cooperate with Alibaba to provide better logistics technology for efficient parcel delivery.

Apart from the deal with STO Express, Alibaba has also reportedly struck a new deal with STO's biggest shareholder, Deyin Investment. The deal, which includes a new framework agreement, will result in the creation of a new unit. STO's deal with Alibaba is the latest of its kind, with Alibaba already investing in STO's direct competitors such as ZTO and YTO. STO is currently one of the leading delivery companies in China that deals with using data technologies for logistical applications. The company provides these solutions to enhance the delivery experience, which has been seen by Alibaba as an important factor in its e-commerce business.

With the major stake acquisition, Alibaba will now have more control over the STO in terms of resource allocation and other important business decisions. According to analysts, the majority of STO's capabilities could be allocated to Alibaba's biggest e-commerce platforms including Taobao and Tmall. The company's recent move is part of its overall strategy to empower different companies through added technology and financing.

The acquisition is also a step forward in fulfilling Alibaba founder Jack Ma's dream of having a nationwide 24-hour delivery service. The company also intends to offer a 72-hour delivery service for customers abroad. Alibaba's different e-commerce platforms currently face some stiff competition in China. One of its biggest competitors, JD.com, already offers same-day delivery in various cities across the country. The company runs its own warehouse and its own delivery fleet. According to the latest Chinese delivery data, JD had outperformed Alibaba in the number of parcels it had delivered during the recently held Spring Festival holiday.  

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