Sources said that after the completion of the acquisition, Ali will remain unchanged for a long time the interface of Best Express China.
Text | Duan Xu
Edit | Song Wei Guan Yiwen
On October 29, Jitu Express (hereinafter referred to as Jitu) and Best Group (nyse:best) reached an agreement to acquire best express's China business under Best Group for US$1.1 billion.
The transaction is a cash-only transaction and is expected to close in the first half of 2022. Best will receive a $600 million in cash in the near future. Upon completion of the transaction, Best Group founder Zhou Shaoning will step down from best express China's board of directors. In addition, the transaction does not involve best express and overseas express delivery businesses.
Previously, "Late Post" reported that the daily single volume of the pole rabbit this year was once close to 30 million, and then it fell back. At present, the daily single volume of polar rabbits is between 20 million and 22 million. Best Group's second-quarter financial report of this year shows that its express delivery business completed 2.3 billion pieces in the quarter, with a daily order volume of about 25 million. A person close to the deal said that the daily order volume after the merger of the two is about 46 million, accounting for 14% of the market share.
According to the latest report of Haitong Securities in September, the 14% market share makes Jitu second only to Zhongtong, Yunda and Yuantong, becoming the fourth largest e-commerce express delivery company in China and is expected to enter the second echelon of China's express delivery industry.
When China's private express delivery was born thirty years ago, there were many participants in the market. After years of integration, the express delivery industry has formed a pattern dominated by "four links and one reach + JD.com and SF". Over the past decade, this pattern has remained largely stable until the rise of the Polar Rabbit. If the acquisition is completed, the new pattern will become "three links, one reach one rabbit + JD.com and SF".
With the acquisition of Best by Jitu as the node, the express delivery industry may enter a new round of integration period.
A glued acquisition
It is not easy for Jitu to acquire Baishi, and the first hurdle is the price.
Best, which is already listed on the U.S. stock market, has seen its share price slump in recent years, falling from $4.33 billion at the time of the IPO to its current $820 million (as of the close of trading on October 28).
The Express delivery business in China, which accounts for nearly 60% of Best Group's revenue, has continued to lose money in recent years and is accelerating: in the second quarter of 2020, Best Group's loss was only 30.9 million yuan, but in the second quarter of this year, Best's loss expanded to 466 million yuan.
But Best, which has a market capitalization of only $800 million, sold its biggest source of loss for $1.1 billion.
A person close to the deal said that Jitu had taken a fancy to the resources and talents of Baishi. On the one hand, Jitu has many outlets in the sinking market, while Baishi has a relatively deep accumulation in first- and second-tier cities, and the two capabilities are complementary; on the other hand, Jitu, which is developing markets in the Middle East and Latin America, looks at the established and experienced team owned by Baishi.
"JiTu is ready, and after the acquisition is completed, it will recruit people who have volunteered to go to sea within Baishi." said the above-mentioned person.
According to "LatePost", in the face of the only bidder, Ji Rabbit, Baishi once gave an offer of more than 1.6 billion US dollars.
Throughout the transaction, the two parties of Jitu and Best could not agree on the price. It was not until the day before the agreement was signed that the parties finalized the amount. People close to the deal said that Best Group hopes to sell more money to support the future development of its express and overseas express delivery business.
The second level is Ali. After entering China, because of the ambiguous relationship between Jitu and Pinduoduo, Ali has always been extremely cautious about cooperation with Jitu. So far, Jitu has not yet accessed any e-commerce platform of alibaba.
But Jitu has always wanted to access the Ali e-commerce platform, which is particularly urgent in the near future: it is Pinduoduo's orders that help Jitu gain a firm foothold in the Chinese market, but after the second quarter of this year, pinduoduo's own user volume and order volume growth are about to hit the ceiling. Pinduoduo's recent financial report shows that from the middle of last year to the middle of this year, the number of active buyers of Pinduoduo reached 849 million, and according to the data released by the China Internet Network Information Center at the beginning of the year, the scale of Chinese netizens was only 989 million, and the penetration rate of Pinduoduo has exceeded 86%.
It is understood that at the beginning of this year, Li Jie, the founder of Jitu, had an interview with Liu Zheng, the cfo of Ali Group's Cainiao Network, to discuss the matter of accessing the Ali system. The two sides talked happily, but Ali still did not agree to Li Jie's request in the end.
A Jitu insider told "Late Post" that "We have been telling Ali that you do your e-commerce, I do our express delivery, and the business matters still have to be seen as business." ”
Baishi, which has been in the Ali system, has become the breakthrough of the pole rabbit.
Alibaba is best-in-class shareholder, holding 37 percent of the shares, higher than founder Zhou Shaoning's 12 percent, and the board of directors' voting rights of 46.2 percent, slightly lower than Zhou Shaoning's voting rights. Moreover, Ali is also the most important source of orders for Best. For this acquisition, Ali's attitude is crucial.
Since 2017, there have been rumors in the market that Best Group will sell its express delivery business. Most of these rumors ended in vain. Under the background of anti-monopoly this year, Ali's attitude has relaxed. In September, Reuters reported that Ali was considering selling its stake in Best Group.
According to "Late Post", Ali did not sell his shares in best group in this transaction. Sources said that under the mediation of Best, Jitu, Best and Ali reached an agreement before the acquisition: after the acquisition is completed, Ali will maintain the interface to Best Express China for a long time, and Best Express China will maintain independent brand operation.
This seems to be a win-win-win deal: Ali gets "face", Jitu gets "Lizi", and Baishi gets the funds needed for the next stage of development.
The express delivery industry has entered a new round of integration
A senior express industry insider said that the focus after the merger will be to reduce losses. After the completion of the acquisition, Jitu will spend a lot of effort on the merger of outlets and the merger of customers.
In its 18th year of existence, Best Express "has 700,000 employees involved in daily business operations". According to the official website of Jitu, it currently has "nearly 350,000 service personnel" in the world. The two companies and their franchisees employ about 1 million people in Chinese mainland. Jitu's acquisition of Best Express China is not one of the largest in the history of China's commercial M&A, but it will be one of the largest M&A involving the largest number of employees.
The above-mentioned industry insiders predict that for a period of time after the completion of the acquisition, the total order volume of Jitu plus Best will not only not rise, but also experience a period of decline.
After the new crown epidemic in 2020, the domestic express delivery industry has once again erupted in a price war, and the express delivery price in the core area of Yiwu was once as low as the level of "1.3 yuan national free shipping". The price war even implicated SF, which has always been known for its good operating conditions: in the first quarter of this year, SF lost 900 million yuan for the first time after its listing, and the company's founder Wang Wei apologized at the shareholders' meeting.
Although the price war in the express delivery industry has been fought for nearly two decades, all people in the industry believe that this round is different from the previous one. "In the past, how to fight, the Tongda department was still the Tongda department, but this round must be fought until someone quits." Another senior express delivery industry person believes.
There are many reasons for such fierce competition, but the core is only one: in 2021, express orders from Alibaba's e-commerce platform fell below 50% for the first time in nearly a decade.
In the past, Ali has been trying to integrate the entire express delivery industry, for which it has set up a rookie network. Ali also took a stake in all members of the Tongda Department. In the past, every time the price war was fought to the point of getting close to getting out of control, Ali would actively intervene.
Ali's voice in the express delivery industry has declined relatively, coupled with the addition of non-accessible enterprises such as Jitu, Ali no longer has the ability to mediate the price war.
"In this way, the weak companies in the industry will either die naturally or be acquired and merged." The result is the same, that is, there will be fewer head players. A courier industry researcher believes.
External forces are also driving the integration of the express delivery industry. The fierce price war has seriously affected the income of all express delivery workers, especially the more than 3 million couriers at the bottom.
At the beginning of 2020, The China Post Express Newspaper released a report saying that 75.07% of couriers had a monthly income of less than 5,000 yuan. Most couriers reported that since last year, although the number of deliveries has increased significantly, because their single ticket dispatch fee has dropped from 2 yuan to 1.2 yuan, the income has not risen but has declined.
In order to protect the legitimate rights and interests of couriers, in July, seven departments jointly issued the "Opinions on Doing a Good Job in Protecting the Legitimate Rights and Interests of Courier Groups". In August, the Tongda Department and Jitu announced at the same time that the end of the network would increase by one cent per ticket. However, people in the industry generally believe that without ending the price war, the income of couriers cannot be fundamentally improved.
In this context, in August this year, China's Ministry of Commerce and other nine departments jointly issued the "Special Action Plan for the High-quality Development of Trade and Logistics", which proposed to "support and encourage qualified commercial and trade enterprises and logistics enterprises to optimize the integration of resources and expand the scale of business through mergers and acquisitions, listing financing, alliance cooperation and other means".
"The overall idea of the government is to curb the vicious domestic competition and encourage logistics and express delivery companies to go to sea." A courier industry expert said.
For the future direction of integration, a senior investor in the industry said that it may be that "the Tongda department continues to be acquired by external companies".
Ali is one of the most likely buyers, and it may acquire one or more courier companies. In September 2020, Alibaba increased its stake in Shentong to 25%. At the beginning of this year, Wang Wenbin, who served as the general manager of Ali Cainiao Network, "parachuted" to Shentong as general manager, and brought a large number of Ali cadres, with the goal of digital transformation of express delivery. In September, Shentong announced that Ali had acquired a new share option and could buy up to 21% of Shentong's shares. Ali is only one step away from holding Shentong.
Another possible integration direction is SF's acquisition of other express delivery companies. Since last year, SF has been more actively involved in the field of e-commerce express delivery than in the past, not only the single volume of SF special offers has soared, but also SF has launched its own franchised express delivery brand Fengwang Express. The acquisition of Tongda enterprises will greatly increase SF's market share in the e-commerce field.
The most unlikely thing is the integration within the Tongda department: unlike the complementarity of Jitu and Baishi, the network and customers within the Tongda department overlap very highly, and the significance of merging the network is not great.
In the past, the integration of the express delivery industry was "artificial" integration under the influence of upstream enterprises. Now, the express delivery industry is about to start the integration centered on the logic of the industry.