JD Logistics, a Hong Kong-listed logistics arm of the e-commerce giant JD, has entered an agreement to buy a 67% stake in courier rival Deppon Logistics Co., Ltd. for RMB 9 billion ($1.4 billion).

Why it matters: After a fierce price war, China’s express and logistics industry is undergoing a market consolidation whereby small players have begun merging with giant competitors. 

  • The deal is the latest move by JD in building its logistics infrastructure network, a foundational service for China’s e-commerce market, through external acquisition and investment. The e-commerce titan has backed many other logistics and delivery companies such as China Logistics Property Holdings Co., Kuayue Express, and Dada Nexus.
  • Through investments, JD is tapping into different verticals in the logistic and supply chain businesses. Deppon provides “differentiated services” and “the overlap is not much” to JD Logistics’ core business, according to Thomas Chong, analyst at investment bank Jefferies. Deppon focuses on large items, freight transportation, and manufacturing customers. JD Logistic’s other subsidiaries, Kuayue focuses on air freight and enterprise clients, while Dada Nexus focuses on-demand inter-city grocery and parcel delivery to individual consumers.

READ MORE: The Big Sell | Is China’s courier price war reaching a tipping point?

Details: JD Logistics’ investment in Deppon will be achieved through acquiring a 99.99% equity in Ningbo Meishan Baoshui Area Deppon Investment Holding Company Limited, an investment vehicle that holds a 66.5% stake in Shanghai-listed Deppon Logistics, JD Logistics announced in a March 13 filing to the Hong Kong stock exchange.

  • Upon the completion of the deal, Deppon’s financial results will be consolidated into JD Logistics’ as a subsidiary business, according to the statement.
  • Deppon’s brand will be maintained for independent operation, thus providing a favorable career path for the team, local media Lieyun reported, citing an internal speech made by Yu Rui, CEO of JD Logistics. The comment resolves previous rumors about JD’s plan to merge Deppon’s business and dissolve its team.
  • Since Deppon is listed on the Shanghai stock exchange, JD Logistics will make a mandatory general offer for all Deppon shares at a price of RMB 13 per share. The transactions are subject to regulatory approvals and other closing conditions.

Context: JD Logistics’s revenue increased 43% year-on-year to RMB 105 billion in the fourth quarter of last year, according to the company’s 2021 financial results, its first annual earnings released to the public since it went public last May.

  • Though still loss-making, JD Logistics’ revenue from non-JD customers exceeded half of the total revenue for the first time in 2021, hitting 56.5%. The logistic company has long hoped to  rely less on business from its parent company.
  • Deppon is a logistics company known for its large parcel deliveries. It provides a wide range of solutions, including small and large parcels deliveries, full truck load transportation, and warehousing management in China.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via lixin@sixthtone.com or Twitter.