Alibaba to consolidate its global logistics network with an infusion of $15 billion

Alibaba is aggressively pushing to streamline and make more efficient its global logistics network.

In a move aimed at expanding its footprint in markets overseas, Chinese e-commerce giant, Alibaba Group has announced that it will sink in $15.12 billion (100 billion yuan) over the next five years to build a global logistics network and take control of a $20 billion unit.

To this end, Alibaba will invest 5.3 billion yuan in Cainiao Smart Logistics Network while raising its stake to 51%, from 47%, in a move that will boost Cainiao Smart Logistics Network’s valuation to nearly $20 billion.

“Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba’s commitment to building the most-efficient logistic network in China and around the world,” said Daniel Zhang, Alibaba’s CEO in a statement on Tuesday.

This announcement comes in the wake of Alibaba aggressively expanding its logistics and e-commerce network overseas. It recently announced direct sales channels in countries such as the Philippines, Indonesia and Thailand.

It has also recently boosted its stake in Singapore-based Lazada Group.

All of its moves point to its intention of boosting control over its domestic warehousing and delivery market, which has become increasingly competitive as firms seek to capitalize on logistics data assets.

Significantly, earlier this year in June, SF Holding Co, a top logistics firm, cut off its ties with the Cainiao coalition, since it said Alibaba had requested data whose scope was beyond the existing agreement.

Alibaba has denied the claims.

On Tuesday, Alibaba said the $15 billion investment will be used to develop its data technology and improve its warehousing and delivery development.

Alibaba has subscribed to Cainiao’s new shares in order to boost its stake to a majority in the company. As a result, Alibaba will gain a new board seat in Cainiao, and will represent four out of a total seven seats.

Incidentally, despite attracting billions of dollars from equity investors, Chinese logistic firms haven’t fared well in recent public listings.

Shares of ZTO Express Inc, which raised $1.4 billion in its IPO in October 2016, are down 22% from its listing price.

While Best Inc, a Chinese delivery firm, had hopes of raising up to $1 billion in its U.S. IPO, managed to raise only $450 million.

Alibaba did not immediately respond to a request for comment.

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