Alibaba calls off Cainiao IPO, looks into $3.8b investment for full ownership

Cainiao’s smart warehouse in China / Photo credit: Cainiao

Alibaba Group is dropping the Hong Kong IPO for Cainiao, its logistics subsidiary, South China Morning Post reported.

The news comes a few months after the Chinese tech giant shelved IPO plans for another subsidiary, grocery arm Freshippo.

Alibaba has proposed to purchase all of Cainiao’s outstanding shares and, in turn, increase synergies between logistics and its main ecommerce business. The group currently owns a 64% share in Cainiao and is allocating up to US$3.8 billion to buy the rest from minor shareholders.

Once the purchase is done, Alibaba aims to merge Cainiao’s operations with its own. Doing so will let Cainiao support Alibaba’s global logistics growth and better integrate with the group’s ecommerce businesses, which includes Taobao, Tmall, and the Alibaba International Digital Commerce Group.

Amid an intensifying battle with the likes of PDD, Alibaba began a major restructuring effort a year ago. The company was set to form six different business units and pursue an IPO for each, though after the change of plans for Freshippo and Cainiao, it’s unclear whether the strategy remains.

Meanwhile, the group has also made adjustments in its Southeast Asian business, which remains “very important” for the company. Pakistan-based subsidiary Daraz, for one, saw its original founder leave and replaced by Lazada Group head James Dong as acting CEO.

Both Lazada and Daraz also laid off staff just this year.

Founded in 2013, Cainiao has grown into a US$13.7 billion business. In the December quarter, the unit grew its revenue by 24% year on year, mainly due to its cross-border logistics services.

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