JD.com Buys $432 Million Majority Stake In Express Delivery Giant

Chinese e-commerce giant JD.com Inc JD has acquired a controlling stake in Chinese express transport company Kuayue Express Group for 3 billion yuan ($432 million). JD Logistics, the logistics arm of JD.com, will now work with Kuayue Express, a firm regarded as a front-runner in "limited-time express service" — integral to JD.com's idea of same- and next-day delivery. 

"Kuayue Express is a reliable delivery services provider and industry leader in express courier services with innovative technology and advanced operations," said Wang Zhenhui, CEO of JD Logistics. "Collaborating with Kuayue Express advances our integrated supply chain management, technology initiatives and service expansion to third-party merchants."

During the filing with the Hong Kong Stock Exchange (HKEX), JD.com stated that it would acquire existing shares from Kuayue Express and also buy the company's newly issued shares. Kuayue Express was valued at over $2.9 billion but has since struggled with cash flow. Before JD.com's announcement, market speculation since May was about courier company ZTO considering acquiring a stake in Kuayue Express.

Shenzhen-based Kuayue Express has over 50,000 employees, 13 chartered cargo planes and 17,000 trucks, handling more than 300,000 orders daily across 500 cities in China. The company was one of the earliest to offer same- and next-day delivery options in the country, since its inception in 2007. 

"The cooperation between Kuayue Express and JD Logistics is expected to rewrite the current competitive pattern of China's logistic market," Kuayue Express said in a statement on WeChat. 

For JD.com, this acquisition would build on its idea of scaling up from an e-commerce company to one that can exercise control over end-to-end supply chain operations. The company already operates futuristic warehouses with a high degree of automation and runs its own last-mile delivery fleets — while delivering everything from fresh food to electronics. 

However, the Chinese e-retail market is heavily competitive, with JD.com's rival Alibaba strengthening its logistics capabilities of late. Alibaba's affiliate Cainiao Network is the world's second-largest cross-border cargo carrier. This helps Alibaba cover its international mid-mile transport needs, while also gaining sizable control over the delivery experience it provides its overseas customers. 

This year, JD.com has been active in acquiring companies aside from building its own fleets, having bought a $100 million stake in Li & Fung, a Hong Kong-based supply chain management firm for primarily U.S. and European brands. This partnership will help JD.com push its e-commerce platform further into Western markets, where it has had less reach compared to its presence in China. 

Since successfully mitigating the spread of COVID-19, China has rebounded to nearly pre-pandemic levels of economic activity. The widespread quarantine and lockdown of Chinese cities meant more e-commerce sales, which saw a 19% increase in Q1 2020 compared to the same quarter last year, while offline sales dropped by 13% in the same period. 

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