The delivery man

SF Express brings in state firms to boost growth

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01 Nov 2013
Week in China

SF Express is often hailed as China’s answer to Fedex. But the courier has been very low profile – most people got their first glimpse of its chairman Wang Wei in late 2011, after interviews in three Party-run newspapers. In this rare media appearance, Wang talked about how he viewed state backing as crucial for the development of private sector courier firms like his own.

Before that Wang hadn’t even appeared in the company’s internal magazine. Going unrecognised by most of his employees had advantages, allowing the unknown Wang to inspect how some of his 160,000 staff perform. And as the owner of 99.99% of SF Express, Wang didn’t have to answer to others about how he did things. As we mentioned in WiC183, Wang had been so unreceptive to shareholding dilution that private equity firms once offered a Rmb500,000 ($81,967) bounty for anyone able to arrange for them to dine with him.


We want long term strategic investments, not short-term financing

Is Wang now changing his approach? China Merchants Group put a couple of photos of him on its website last week, showing China’s one-time Scarlet Pimpernel meeting its senior management. That’s because the Shenzhen-based conglomerate had just spearheaded the purchase of a 24.5% stake in SF Express. The September acquisition added a consortium of state-backed firms to Wang’s shareholder register and was the first outside investment in the country’s largest privately-run courier since it was founded 20 years ago. At Rmb8 billion, the deal valued Wang’s firm at Rmb32 billion, or roughly 25 times last year’s earnings.

According to New Fortune magazine, the other new investors in SF Express are CITIC Capital and Suzhou-based Oriza Holdings, which are both state-backed investment firms. The other strategic shareholder, Ancient Jade Capital, was founded in 2011 by a former official with the Ministry of Commerce.

Century Weekly said the company has been in talks with the strategic investors since the beginning of the year. “The fundamental requirement is that they don’t press SF to go public,” Wang Lishun, SF Express’ vice president told the magazine. “We want long term strategic investments, not short-term financing.”

In the lead up to this month’s Third Plenum in Beijing (see last week’s Talking Point) much of the discussion has focused on how to increase the influence of the private sector in the Chinese economy. Wang’s strategy looks a little different, morphing from a purely private firm into one with state shareholders. New Fortune says the deal is designed to mix his “private sector genes with those of the state sector”. “Wang’s chief concern isn’t about valuation but the background of the new shareholders,” the magazine suggested.


It is easy to buy more airplanes.
But it is difficult for SF Express
as a private firm to negotiate for
more transportation routes and the support of more regional airports

China’s delivery industry is growing by over 20% a year and Wang’s major competitors have been busy recapitalising. Regulators have already approved the Rmb10 billion listing plan of China Post Courier and Logistics, a unit of state giant China Post Group. It looks likely to be one of the first to IPO once Shanghai’s primary market reopens. There is also more competition from abroad. In June the National Business Daily said UPS got the green light to set up domestic courier operations in 19 Chinese cities.

According to New Fortune, revenues at SF Express were Rmb211 billion last year or about 20% of the domestic delivery market (China Post is the largest player with a 27% share). To grab a bigger slice of the market – which has piggy-backed on the rapid growth in online shopping – SF Express plans to more than double its fleet of courier jets to 25 by 2015.

“It is easy to buy more airplanes. But it is difficult for SF Express as a private firm to negotiate for more transportation routes and the support of more regional airports,” the Southern Metropolis Daily commented. “SF Express needs to lean on state-sector resources for faster growth, and it has made its choice.”

As for Wang, the secret’s now out on what he looks like and equally, what he’s worth. His remaining stake in SF Express is valued at about $4 billion, based on what his new partners have paid for their 25%. When WiC profiled the logistics mogul in March, Forbes had estimated his wealth at just $1.5 billion. So it sounds like he’s had a good six months…

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