Things you don't know - the story behind the acquisition of Tiantian Express

　　#Laogao E-commerce Online Information# On December 30, 2016, Suning invested RMB 2.975 billion in cash to acquire 70% of Tiantian Express’s shares; the remaining 30% of the shares were priced at 1.275 billion yuan and will be completed within 12 months after the completion of the delivery. The valuation of 100% equity of Tiantian Express, the target of this transaction, is 4.25 billion yuan. Tiantian Express predicts that after-tax net profit will not be less than 84 million yuan in 2016.

　　In the announcement, Suning Cloud Commerce stated that by acquiring Tiantian Express, the company can greatly strengthen Suning Logistics' last-mile distribution capacity, and can integrate the express network resources of both parties in warehousing, trunk lines, terminals and other aspects in a relatively short period of time.

　　1. Why did Tiantian Express suddenly sell itself?

　　In June 2016, Tiantian Express stated in a high-profile manner that it would go public independently. Not only did the official WeChat official account release a message saying that a listing preparation team was established in March 2016, and will decide to choose a backdoor listing, the New Third Board or the Innovation Board in mid-to-late August based on the backdoor listing of other express delivery companies. Moreover, Executive President Zhang Hongtao revealed to several media in subsequent public events that the company has hired PwC as a financial consultant and is expected to issue a half-year audit report before June 30, and will be listed or backdoor listing around mid-December.

　　But by December, the plan to list Tiantian Express was not realized, but decided to give up independent listing and join Suning Yunshang. What exactly caused Xi Chunyang's attitude to change 180 degrees?

　　2. There is no hope of independent listing

　　Chen Xiangyang, executive vice president of Tiantian Express, said, "Letting go means re-taking the old path of the 'Tongda Group', and the competition will be fierce. However, Tiantian's scale is not that large, and it is difficult to compete head-on with these large express companies." In Chen Xiangyang's view, listing may not be a good way out for Tiantian. Chen Xiangyang admitted that e-commerce is developing very fast now, and the business of express delivery companies is mainly aimed at the B-end to meet the needs of merchants. The industry competition is fierce, and Tiantian Express started late and has a small scale. If you want to occupy a place in the express delivery industry in the future, you need to focus on the C-end business.

　　In 2016, express delivery companies ushered in a wave of listing. YTO and STO officially listed on A-shares through backdoor acquisition, and ZTO chose to go public independently in the United States to go public as soon as possible. Although SF Express and Yunda did not complete the listing in 2016, the actual controllers of Dingtai New Materials and Xinhai Co., Ltd., which were backdoored, have changed, and their internal operations have been changed to SF Express and Yunda, only with the change of the transaction name. It is expected that the two companies will gradually change the transaction abbreviation in early January to achieve listing.

　　Let’s look at Tiantian Express again. Although Tiantian Express is one of the early express delivery companies in China, its business scale has not even entered the top seven (the top seven are Shentong, YTO, ZTO, SF Express, Yunda, Postal Express, and Best Huitong), which is considered to be at the tail of the second echelon.

　　Compared with the first echelon, how big is the gap? ZTO's express delivery business volume in 2015 was 2.95 billion pieces, and Tiantian Express only had 1.26 billion pieces in 2016). In the second echelon, the postal service is the national team. Best Huitong received a huge financing of 5 billion yuan in September, and the position of Tiantian Express is awkward. In addition, there are already many giants in the industry or are about to be listed, and the listing time for Tiantian Express, which has a highly similar business, is not determined. If you want to insist on going public, both market valuation, investor confidence and policy dividends will be greatly discounted.

　　3. Have to commit

　　If it is not listed, Tiantian Express needs to find a capital consortium as support.

　　As we all know, Tiantian had a close relationship with Shentong before. As early as 2012, Xi Chunyang, former president of Shentong Group, took over 60% of Tiantian Express's equity in his personal name for 160 million yuan, and served as chairman and CEO of Tiantian Express. After the acquisition of Tiantian, although Xi Chunyang no longer holds specific positions in Shentong headquarters, he still holds Shentong shares.

　　However, the relationship between Shentong and Tiantian Express began to estrange itself in the second half of 2016. One of the clues is that from October 27, Tiantian Express's official title of Xi Chunyang has changed from "Head of Shentong and Tiantian Strategic Cooperation Group" to "Chair of Tiantian Express". Since it was a critical period for Shentong to go public, it can be speculated that based on the needs of listing, Shentong distanted Tiantian Express. This makes Tiantian Express need to find another capital to rely on in addition to Shentong.

　　4. Alibaba matches, Suning is expensive

　　Regarding the significance of this acquisition, the above announcement stated that Tiantian Express’s complete express delivery network and mature express logistics capabilities are the more suitable cooperation targets in Suning Logistics’ eyes. By acquiring Tiantian Express, Suning Logistics' last-mile delivery capabilities can be greatly strengthened. With the development of online business, the number of delivery orders has grown rapidly. The company needs to invest more funds, manpower, etc. to broaden and deepen the logistics network. By acquiring Tiantian Express, it can integrate the express network resources of both parties in warehousing, trunk lines, terminals and other aspects in a relatively short period of time, improve distribution efficiency, reduce operating costs, and thus improve the scale effect and flexibility of the entire logistics network.

　　Suning Logistics has achieved good results in recent years, but it needs to be compared. JD.com, which also does self-operated logistics, was established 8 years later than Suning, but in terms of national coverage, it is comparable to Suning (covering 2,646 districts and counties across the country), and the number of distribution stations and distribution efficiency have exceeded Suning. Therefore, in the face of the rapid development of e-commerce market, Suning has to change its strategy and find a faster logistics development model. Integrating an existing express delivery company has become Suning's key consideration, and every day is the right target.

　　5. Alibaba may be a well-known winner

　　In the entire transaction, in addition to Suning and Tiantian Express, the one who benefited the most was Alibaba behind the scenes. The express delivery expert who did not want to be named said bluntly that Alibaba has a great relationship in this acquisition case. "In this acquisition case, Alibaba has done a lot of matching work." As Suning's second largest shareholder, Alibaba also has many cooperations in the commercial field.

　　Express delivery expert Zhao Xiaomin said that in the future, Alibaba's penetration of express delivery companies will continue, which will be a good supplement to Jack Ma's so-called "new retail". It can be foreseeable that Suning Cloud Commerce and Alibaba will further coordinate in logistics. On August 10, 2015, Alibaba Group and Suning Yunshang Group Co., Ltd. announced a comprehensive strategic cooperation. Alibaba Group invested approximately RMB 28.3 billion to participate in Suning Yunshang's private placement, accounting for 19.99% of the total share capital after the issuance, becoming the second largest shareholder of Suning Yunshang.

　　6. Listing and acquisition, why does the express delivery industry operate frequently?

　　If you want to give the express delivery industry a keyword in 2016, it must be "listing". The express delivery industry, which has grown along with e-commerce, has operated frequently in 2016.

　　The main reasons why express delivery companies are scrambling to go public are attributed to two points: First, the entire express delivery industry has reached a turning point and the growth rate has slowed down. In 2015, the national express delivery business volume increased by 48% year-on-year, ending the previous record of maintaining a growth of more than 50% for four consecutive years. Affected by the economic situation, this figure dropped sharply to 34% by 2016. (The figures are from statistics from China Post Bureau). Second, although the industry's growth has slowed down, competition among express delivery companies is intensifying. According to the express delivery industry data released by CICC, the gross profit margin of the express delivery industry has declined from about 30% in 2007 to the current level of 5%-10%.

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