JD.com Plans to List Shipping Unit to Ride E-Commerce Boom By Bloomberg

(Bloomberg) — JD (NASDAQ:JD).com Inc. plans to list its shipping business in Hong Kong, raising potentially billions of dollars to capitalize on China’s post-Covid e-commerce boom.

JD Logistics Inc.’s initial public offering could raise at least $5 billion and value the unit at about $40 billion, people familiar with the matter have said. Details of the proposed spinoff haven’t been finalized, the company said in an IPO prospectus filed to the stock exchange. JD.com’s shares gained more than 5% in Hong Kong Wednesday.

E-commerce operators like Alibaba (NYSE:BABA) Group Holding Ltd. have benefited as Covid-19 lockdowns drove consumers online and galvanized demand for the services that deliver parcels to doorsteps. Chinese e-commerce revenue should surpass 50% of the country’s total retail sales this year — a first anywhere in the world, according to researcher EMarketer.

JD Logistics’s imminent IPO would be a milestone for its parent, which spent years building one of China’s largest courier services to ensure on-time delivery and retain control over its shipping network. That inhouse operation, which spanned more than 800 warehouses across the country as of Sept. 30., has been credited for speeding JD.com’s recovery from early Covid 19 disruptions.

“The spin-off and separate listing will help JD.com crystallize the value of its logistics arm, which it had invested in heavily for more than a decade,” Bloomberg Intelligence analyst Vey-Sern Ling said. “The funds raised can aid JD Logistics’s expansion without burdening JD.com. Going forward investors and management can focus on two distinct businesses, e-commerce and logistics, which have different growth and profitability profiles.”

Read More: JD’s Logistics Unit Said to Mull IPO at $40 Billion Valuation

Chinese e-commerce sales have increased several fold during the pandemic, making companies that help handle shipping and deliveries particularly attractive, Elysia Tse, head of Asia Pacific research and strategy at LaSalle Investment Management, said in an interview with Bloomberg Television this month.

JD Logistics’s net loss narrowed to 11.7 million yuan ($1.8 million) in the nine months ended September from more than 80 times that a year earlier. Revenue grew 43.2% to 49.5 billion yuan, according to its filing.

BofA Securities Inc., Goldman Sachs Group Inc (NYSE:GS). and Haitong International Capital are the joint sponsors of the proposed IPO, according to the prospectus.

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