Alibaba invests $1.36 billion in ZTO Express

The move is designed to enable further collaboration in the transformation of China’s logistics industry.    Alibaba Group and its logistics arm Cainiao will invest $1.38 billion in the Chinese express delivery company ZTO Express (Cayman) Inc. in exchange for a 10 percent equity stake.
   ZTO, which made the announcement, said the deal is expected to close in early June.
   “The investment will see Cainiao and ZTO deepen their collaboration in the transformation of China’s logistics industry amid the growth of New Retail, a concept developed by Alibaba that promotes seamless integration between online and offline commerce,” said the press release from ZTO. “The investment will further support both Cainiao and ZTO’s focus on building up first- and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics and technology-driven smart solutions.”
   ZTO, which is listed on the New York Stock Exchange, had revenue of $2 billion and net income of $485.5 million in 2017, according to its annual report filed with the U.S. Securities and Exchange Commission. The company said its parcel volume in 2017 was 6.2 billion.
   A company spokesman explained that the company operates on a “network partner” model in which ZTO does sorting and line-haul transportation and relies on local shipping companies for last-mile delivery.
   ZTO’s annual report said that at the end of 2017 its network consisted of 76 sorting hubs operated by ZTO and six other operated by business partners connected by 2,000 line-haul routes. At the end of last year ZTO said it had a fleet of more than 3,600 self-operated trucks and outsources part of its work to Tonglu Tongze, a company with 1,200 trucks.
    ZTO’s  pickup and delivery outlets are operated by network partners. At the end of last year ZTO had over 29,000 outlets covering 98 percent of China’s cities and counties.