view network Another blockbuster transaction took place in the logistics industry, this time the protagonists are the industry leader SF Holdings, and the fast-growing Jitu Express.
On May 12, SF Holdings Co., Ltd. announced that SF Holdings, a subsidiary of SF Holdings, recently signed an “Equity Transfer Agreement” with Shenzhen Jitu Supply Chain Co., Ltd., and SF Holdings intends to transfer Shenzhen Fengwang for 1.183 billion yuan. 100% equity of Information Technology Co., Ltd.
Fengwang Information holds 100% equity of Fengwang Express, and Fengwang Express is the main body of economic express business operation in the franchise mode. After the transaction is completed, Fengwang Holdings no longer holds the equity of Fengwang Information.
This means that SF Express has withdrawn from the economical express delivery market and returned to the mid-to-high-end express delivery that it is good at.
SF Holdings stated that in view of the changes in the economical express delivery market environment of the franchise model, Fengwang Information is still in the initial stage of development and continues to lose money. This sale can eliminate the negative impact of Fengwang Information’s losses on listed companies.
For SF Express, it is a timely stop loss, and for Jitu, it is a springboard for growth.
SF “subtraction”
At the beginning of its establishment, Fengwang had high hopes.
Turning the clock back to 2019, SF Express stepped into the low-end e-commerce market with “special offers” and quickly drove SF Express’ business volume; one year later, Fengwang Express was established, and SF Express launched a dual-brand operation model.
Wang Wei once publicly stated that Fengwang is positioned at a cost-effective price and has a certain guarantee of service, and there is a clear difference between it and E-Trademark Express. At present, the company is more focused on making e-brand express, and the low-end customers can either upgrade to e-brand express, or sink to Fengwang products with better cost performance.
SF Holdings introduced it like this: “SF Express is a direct sales network, serving e-commerce platforms and merchants that have high requirements for user experience, with stable timeliness and door-to-door delivery; SF Express is a franchise network, serving the following In the Shenyang e-commerce market, the pricing is more favorable.”
However, the development of Fengwang has not been as expected, and it has been in a state of loss since its establishment.
The announcement shows that Fengwang Information will lose 747 million yuan in 2022. In the first quarter of this year, the total assets were 716 million yuan, the total liabilities were 2.126 billion yuan, the operating income was 691 million yuan, and the net loss was 143 million yuan.
Some research assumes that Fengwang will have an average daily order volume of 3-3.5 million orders in 2023, and it is estimated that Fengwanggear will affect the income of listed companies by about 1.5%. The main reason for the sale of Fengwang is that the economical express delivery market environment of the franchise model has changed. In 2022 and 2023Q1, Fengwang’s information losses will be 750 million yuan and 140 million yuan. According to the 63.75% equity ratio, the corresponding losses will be 480 million yuan and 90 million yuan respectively. It is expected to have the largest loss in the company’s new business.
Selling Fengwang’s equity and focusing on mid-to-high-end express delivery can eliminate the negative impact of losses on listed companies. SF Express estimates that the equity investment income that can be realized in this transaction will affect the company’s net profit attributable to the parent company by 150 million yuan. ?
The announcement also stated that Fengwang Holdings intends to increase the capital of Fengwang Information by about 2.35 billion yuan after the signing of the transaction agreement and before the completion of this transaction, and part of the amount will be used to pay off the amount that Fengwang Information and its subsidiaries should pay to SF Holding and its subsidiaries. Non-operating accounts payable and some operating accounts payable. After the capital increase is completed, Fengwang Information’s simulated net assets as of March 31, 2023 are 940 million yuan.
For SF Express, behind the timely stop loss is a strategic play to consolidate its advantages. It is worth noting that at the recent performance briefing, Wang Wei led the executive team to say that in the core e-commerce logistics scenario, it will deepen the e-commerce return and cross-border supply chain business.
“While upgrading its personalized service capabilities, SF Express has achieved breakthroughs in the return business cooperation with multiple e-commerce platforms. By the end of 2022, the average daily order volume will double compared with the same period last year.”
On the side of the cross-border supply chain, SF Express stated that it will integrate advantageous resources such as warehousing, express delivery, express delivery, international special planes, and logistics partners in the future to achieve end-to-end timeliness improvement and dynamics from domestic consolidation to cross-border direct mail. The monitoring capability helps the e-commerce platform to expand overseas business through the direct mail mode.
Polar Rabbit “Run”
So, what kind of company is the acquirer?
According to the announcement, Shenzhen Jitu is a wholly-owned subsidiary of Guangzhou Jitu Supply Chain Co., Ltd. Guangzhou Jitu is a wholly-owned subsidiary of Jitu Express Co., Ltd. Jitu Express is the express business operator of Jitu Group in China.
As of December 31, 2022, Shenzhen Jitu’s total assets are 229 million yuan, total liabilities are 714 million yuan, and net assets are -485 million yuan. In 2022, Shenzhen Jitu’s operating income will be 1.305 billion yuan, with a net loss of 140 million yuan.
Guandian New Media learned that Jitu Express is a global integrated logistics service operator. The company was founded in 2015 and entered the Chinese market in 2020. The express network covers Indonesia, Vietnam, China, Saudi Arabia and other countries.
In April 2021, Jitu completed a financing of US$1.8 billion, led by Boyu Capital, followed by Hillhouse Capital and Sequoia Capital. The post-investment valuation was as high as US$7.8 billion, second only to SF Express, JD Logistics and Zhongtong.
Also in this year, Jitu staged a “whale swallow” drama and acquired the domestic express delivery business of Best Group for 6.8 billion yuan.
On October 29 of that year, Best Group and Jitu announced a strategic cooperation agreement. Best Group agreed to transfer the domestic express delivery business to Jitu at a price of about 6.8 billion yuan.
According to the agreement, Best will transfer the equity, assets, outlets, transshipment centers, personnel, technology, systems, etc. of related domestic express companies to Jitu Express.
“This business transfer only involves domestic express delivery business, and has no impact on international, express delivery and supply chain businesses.” Best will further focus on express delivery, supply chain, and international core logistics business, and deeply develop comprehensive smart supply chain services.
It is not surprising that Best Express “sells itself”. At that time, it was speculated that SF Express, Jitu and even ByteDance were negotiating.
On the whole, the development route of Jitu is similar to that of Pinduoduo. They all start with cost performance and become bigger and stronger, and finally gain a firm foothold in the market.
Some analysts pointed out that Fengwang has the SF Express logo, early investment, and franchisee resources, which will be very helpful for Jitu’s own premium and competitiveness improvement.
“The acquisition of SF Express is in line with Jitu’s long-standing development path, and it is also a ‘good story’, which will greatly help Jitu’s pre-listing valuation.”
It is reported that for this acquisition of Fengwang, Jitu stated that the company has always focused on the field of e-commerce express delivery and continuously optimized the experience of e-commerce express delivery services. The acquisition of Fengwang will help consolidate Jitu’s advantages in the field of e-commerce express delivery and enhance Comprehensive service capabilities.
