Alibaba is reportedly in talks with YTO Express’ founders to lift its stake in the Chinese courier company in a move to become the major shareholder, as it accelerates consolidation in the world’s largest express delivery market.
Alibaba (BABA), which already has a 10% stake in YTO, is holding discussions with YTO’s founding couple Yu Huijiao and Zhang Xiaojuan for an additional stake of up to 30%, Reuters reported.
Based on YTO Express’s market value of 47.4 billion yuan ($7 billion) on Wednesday, a 30% stake would be worth $2.1 billion. It was not immediately clear if Alibaba would increase its stake at once or gradually, according to the Reuters report.
The founders own about 53% of YTO mainly via their wholly owned firm Shanghai YTO Jiaolong Investment Development. YTO is China’s third-largest express delivery firm by parcel volume, with a 14% share of the market in 2019.
In response to the Reuters report, an Alibaba representative dismissed the news of its plans to become YTO’s top shareholder and buy up to 30% as “incorrect and categorically false”, without providing any further details. YTO did not immediately respond to requests for comment.
A larger YTO stake would provide the Chinese e-commerce giant with a bigger say in the country’s fast-growing express delivery industry.
Delivery firms in China dispatched 63 billion parcels last year, up 24% from 2018, while revenue for the sector grew 23% to 745 billion yuan, data from the State Post Bureau showed.
The offer price and other details of Alibaba’s plans to boost its YTO stake are yet to be finalised, according to the report, while the founders of the courier seek to sell the bulk of their holdings at a valuation of at least 50 billion yuan. They also plan to retain a stake after any deal with Alibaba.
Alibaba already owns stakes in other large express delivery firms, including STO Express Co., Yunda Holding and Best Inc.
Last week, Alibaba topped quarterly sales estimates for the three months ended June 30, also driven by “robust” revenue growth in its commerce retail business. The e-commerce company has already served investors well with its shares surging 38% so far this year as stay-at-home mandates during the outbreak of the coronavirus pandemic forced more and more people to shop online.
Looking ahead, the $305 average price target implies a more modest 4.5% upside potential in the shares in the coming 12 months.
Stifel Nicolaus analyst Scott Devitt just raised the stock’s price target to $300 from $270 and reiterated a Buy rating, citing strong results across the board.
“Alibaba has emerged from COVID-19 in a stronger competitive position in both e-commerce and offline retail/services,” Devitt wrote in a note to investors. “We maintain our favorable long-term view as management continues to execute well in the core business while strategically investing in attractive growth areas.”
Turning to other Wall Street analysts, the bulls have it all. The Strong Buy consensus boasts 20 unanimous Buy ratings. (See Alibaba stock analysis on TipRanks).
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