Alibaba Group Holding Limited (NYSE: BABA) and its logistic arm Cainiao Network will invest $1.38 billion into China-based express delivery service ZTO Express Inc. (NYSE: ZTO) for $1.38 billion in exchange for a 10 percent equity stake in the company.
ZTO shares rose by 7.85 percent midday on Tuesday.
ZTO, China’s leading express delivery service, went public on the New York Stock Exchange back in 2016. Since then, the company has seen its services rapidly expand in the recent years due to the substantial growth in e-Commerce.
The investment plans to deepen Cainiao and ZTO collaboration in transforming China’s logistics industry amid the growth of New Retail, a concept developed by Alibaba that promotes integration between online and offline commerce.
Alibaba’s idea is to combine the speed and ease of e-Commerce along with the advantages of brick and mortar, such as services like customer care or hands-on experience. Alibaba has already launched its concept in stores throughout parts of China.
“The continuing expansion of New Retail is catalyzing new opportunities and demands in logistics.” said Daniel Zhang, CEO of Alibaba Group and Chairman of Cainiao Network.
"The growth of e-commerce and New Retail in China demands more efficient express delivery and expanded logistics services.” said Meisong Lai, Founder, Chairman and Chief Executive Officer of ZTO.
Moving forward, New Retail will require investment in smart supply chains, retail technologies, advanced logistics and mobile payments, said ZTO in a statement. These investments are aimed to support and bolster experiences for both consumers and merchants.
The investment will also help support Cainiao and ZTO’s focus on establishing a service for first and last-mile pickup and delivery services, warehouse management, cross border logistics and smart technology driven solutions.
The transaction is expected to close in early June.