One of China's largest private-sector conglomerates, Fosun International, is cashing out on its earlier investment for $1.3 billion. According to sources with knowledge of the matter, Fosun has reached an agreement to sell its 6.7 percent stake in logistics firm Cainiao to Alibaba Group Holding.
The Shanghai-based conglomerate, which owns multiple assets across the globe, initially purchased the stake back in 2013. Fosun was one of Cainiao's early investors after it purchased the 6.7 percent stake for $70 million. Through its agreement with Alibaba Group, Fosun is set to make a substantial profit from its earlier investment.
The company, which owns ClubMed resorts and Canadian troupe Cirque do Soleil, plans to use the proceeds of the asset sale to reinvest in other companies. Sources claim that the company is looking to invest in companies in the healthcare and consumer sector, although no concrete acquisition plans have yet been made.
The price of the Fosun's stake values Cainiao at around $20 billion, a bit lower than the logistics firm's actual market valuation. Despite the discount, Fosun still stands to make a hefty profit. For Alibaba, the purchase is well worth its price given how it can use Cainiao's network to further enhance its logistics capability.
With the massive surge in its e-commerce business, caused by the spread of the coronavirus pandemic, Alibaba understands the importance of expanding its logistics network to meet the growing demand. Cainiao's network is expected to greatly enhance its ability to serve its customers, particularly those in remote areas with underdeveloped infrastructures.
Alibaba already owns a substantial stake in Cainiao. In November last year, Alibaba increased its stake in the logistics firm from 51 percent to 63 percent with a 23.3 billion yuan investment.
Cainiao has rapidly grown its logistics network both in China and other parts of the world. On Tuesday, the company unveiled its three-year initiative to further expand its network and increase its efficiency, with the goal of being able to deliver packages in China within 24 hours and globally within 72 hours. The initiative will entail an additional 1 billion yuan investment, which will be used to increase its chartered flights, build new warehouses, and expand its collaboration with other logistics firms around the world.
Under the initiative, Cainiao revealed plans of increasing its chartered flights from 260 to 1,260 over the next nine months. With the additional flights, the company hopes to better serve Alibaba's more than 100,000 online stores and their customers.
