Alibaba Group will shell out 800 million to buy a major stake in Cainiao, a rapid-growing delivery business at the center of a U.S. inquiry. The largest web marketplace in China will also invest billions more in building its own shipping network.
After the purchase, Alibaba will own 51% of Cainiao Smart Logistics Network. The company plans to invest even more in the delivery service even if that takes a heavy toll on its profits. The deal will bring an additional seat on the embattled firm’s board, Alibaba announced Tuesday.
Cainiao is a rapidly growing business and had helped the e-commerce giant to save money on warehouse construction. Cainiao manages over a dozen of shipping companies, which deliver goods to more than 600 destinations.
Alibaba Expanding Delivery Network
Alibaba plans to make an extra $100 billion-yuan investment in the delivery service by 2023 to expand the network. The move will help Alibaba create its own delivery infrastructure just like Amazon did in the U.S.
In 2016, the company reported a 2.2 billion-yuan loss, which is a threefold increase from a year prior. Revenues, however, jumped to 9.4 billion yuan. Analysts praised Alibaba for making a commitment to reporting profit and loss every quarter as each company of its size should do.
Cainiao is a joint project of Alibaba, the Chinese investment firm Fosun International, and the Chinese retail company Intime Retail. The initial investment was 100 billion yuan which helped the nascent firm create its own logistics network.
Earlier this year, Cainiao was accused by one of its partners, SF Holding, that it has removed it from the list if shipping partners and blocked access to critical delivery data. Cainiao replied that SF had blocked access to the data first. The two companies resolved their differences in the end.
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