Alibaba takes control of logistics giant Cainiao

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Chinese e-commerce giant Alibaba Group has taken control of logistics unit Cainiao and pledged to spend 100 billion yuan (15 billion US dollars) over five years to build out a global logistics network, a move that could allay concerns over financial transparency that drew the attention of US securities regulators last year.

According to Reuters, Alibaba will invest 5.3 billion yuan in the first phase to boost its stake in Cainiao Smart Logistics Network to 51 percent from 47 percent, giving it direct control over the loss-making affiliate, suggesting a rough valuation of Cainiao at around 20 billion US dollars.

Alibaba, which will gain an extra seat on Cainiao’s board giving it four out of a total seven seats, added that more shares were issued in the funding round to other investors.

Alibaba CEO Daniel Zhang /Alibaba Photo

“Our commitment to Cainiao and additional investment in logistics demonstrates Alibaba’s commitment to building the most-efficient logistic network in China and around the world,” Alibaba CEO Daniel Zhang said in a statement on Tuesday.

Cainiao was the focus of an investigation last year by the US Securities and Exchange Commission into Alibaba’s accounting practices.

With increasing competition in China’s domestic delivery market, the investment boosts Alibaba’s intention to control the market. The firm said that its long-term plan to invest 15 billion US dollars is a step to develop its data technology and improve its warehousing and delivery.

Alibaba co-founded Cainiao in 2013, with partners including department store owner Intime Group, conglomerate Fosun Group and a handful of logistics companies. It oversees roughly 57 million deliveries a day.

(With inputs from Reuters)

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