Alibaba and Cainiao Invest $1.38 Billion In ZTO Express

A Chinese e-commerce giant struck a notable partnership Tuesday in the country's logistics sector. 

What Happened

Alibaba Group Holding Ltd (NYSE: BABA) and its logistics arm Cainiao announced a strategic agreement Tuesday with ZTO Express (Cayman) Inc (ADR) (NYSE: ZTO), a leading Chinese express delivery company. Investors led by Alibaba and Cainiao will put up $1.38 billion  in return for an approximately 10-percent equity stake in ZTO Express.

Why It's Important

The investment is intended to support the collaboration between ZTO Express and Cainiao in the transformation of China's logistics industry in the areas of first- and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics and technology-driven smart solutions, according to Alibaba. 

The companies involved spoke favorably about their past partnership and emphasized high expectations for the future in an attempt to meet growing demand from "New Retail," a concept developed by Alibaba that promotes integration between online and offline commerce.

ZTO Express has been an important partner to Alibaba Group and Cainiao Network in the development of the new digital economy, Daniel Zhang, the CEO of Alibaba and chairman of Cainiao, said in a statement. The executive said he expects the investment to strengthen synergies across mutual businesses and to create new value and an improved experience for merchants and consumers. 

What's Next

The transaction is expected to close in early June, subject to customary closing conditions. The New Retail concept will require investment in smart supply chains, retail technologies, advanced logistics and mobile payments, according to Alibaba. 

Alibaba Group Holding was up 0.8 percent Tuesday and trading around $200, while ZTO Express jumped around 8 percent and was trading near $21. 

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