Alibaba Group Invests for Strategic Growth with Cainiao Share Purchase Offer

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Alibaba Group Invests for Strategic Growth with Cainiao Share Purchase Offer

  • Cainiao will focus on deepening integration with Alibaba’s e-commerce businesses and creating a more competitive consumer experience
  • Alibaba will invest up to $3.75 billion to acquire outstanding shares from Cainiao minority investors and employees

Photo credit: Alibaba Group

Alibaba Group has proposed to purchase all outstanding shares of Cainiao Smart Logistics Network Limited while concurrently withdrawing its IPO and listing application, the company announced on Tuesday.

The deal will establish a more competitive consumer experience by further integrating Cainiao’s logistics services and Alibaba’s e-commerce businesses.

Alibaba holds approximately a 64% stake in Cainiao and intends to invest up to $3.75 billion to acquire the remaining outstanding shares from minority investors and employees with vested equity.

“Given the strategic importance of Cainiao to Alibaba and the significant long-term opportunity we see in building out a global logistics network, we believe this is an appropriate time to double down on Alibaba’s investment in Cainiao,” said Joe Tsai, Chairman of Alibaba Group.

The offer, which values Cainiao at $10.3 billion, underscored the company’s commitment to investing in and strengthening its e-commerce operations to regain market share and drive growth. Cainiao shareholders may choose to sell or hold onto their shares.

Cainiao delivers uniquely tailored logistics services to Alibaba’s domestic and international e-commerce businesses.

It provides warehousing and fulfillment services, last-mile delivery and pick-up posts, and reverse logistics to Taobao and Tmall Group’s China-based customers. For Alibaba’s cross-border e-commerce businesses, Cainiao covers end-to-end fulfillment, line haul and delivery services to customers worldwide.

The company’s vision for Cainiao aligns with the broader strategic focus underway since September under the new leadership team.

Strategic Shift

Earlier this year, Alibaba CEO Eddie Wu identified reigniting growth in the company’s two core businesses, e-commerce and cloud computing, as top priorities.

He has laid out clear strategies for each business and elevated a new generation of proven Alibaba leaders into management positions to lead execution.

Moreover, the company has completed a comprehensive organizational and governance reorganization that has increased the competitiveness of its businesses by becoming highly focused while taking on a more proactive capital management approach to return value to shareholders.

“The management reorganization resulted in more nimble and efficient decision-making, and we have seen a major positive impact on our business. We are confident that the effects of this reorganization will be reflected in Alibaba’s operating and financial metrics in the future,” said Tsai.

“We have made significant progress in exiting non-core investments and capital returns through dividends and share buybacks. This focus on capital efficiency and return to shareholders will continue without change,” he said.

Alibaba initially announced in May 2023 a comprehensive asset restructuring plan that included a Cainiao IPO. At the time, the company believed a separate listing would better reflect the intrinsic value of its subsidiary businesses.

However, given the market conditions, Cainiao’s IPO at this juncture would unlikely garner a valuation that reflects its strategic value to Alibaba’s business nor achieve the original purpose of unlocking value for Alibaba shareholders.

During Alibaba’s most recent earnings announcement in February, Cainiao’s quarterly revenue rose 24% year-over-year, primarily driven by revenue from cross-border fulfillment solutions.

Order volume for its premium five-day delivery service achieved robust triple-digit quarter-over-quarter growth.

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