China’s Alibaba Group has signed an agreement to invest S$312.5 million (US$248.88 million) for a 10.35 percent stake in Singapore’s postal service, SingPost.
The funds injection will see Alibaba-subsidiary, Alibaba Investment, acquire 30 million existing ordinary shares and 190.096 new ordinary shares, said SingPost in a statement. The two companies signed an agreement that would also allow them to assess the possibility of setting up a new joint venture related to global e-commerce logistics.
SingPost Chairman Lim Ho Kee said in the statement: “This strategic investment by Alibaba is a significant milestone in our transformation journey into the region and is an affirmation of our long-standing strategy in e-commerce logistics as part of SingPost’s growth trajectory.
“SingPost will benefit from Alibaba’s expertise in e-commerce, technology, and business volumes. We see considerable strategic advantages, such as the creation of new relationships and opportunities for strategic cooperation with the Alibaba Group, all of which are expected to increase the Company’s growth and development pace as it pursues regional opportunities.”
The partnership will allow priority to be given to SingPost’s logistics services and aims to provide Alibaba access to the Singapore postal service provider’s global logistics network. It will also improve the Chinese e-commerce operator’s regional e-commerce logistics infrastructure including warehousing and last-mile delivery, and enable SingPost to tap Alibaba’s e-commerce sales volume.
SingPost is the country’s national postal service provider for more than 150 years, and has had to battle to retain its market relevance amid increasing e-commerce transactions where consumers receive their purchases directly from merchants, and the emergence of middleman shipping service providers such as Borderlinx and ComGateway.
SingPost’s e-commerce and related businesses currently account for some 26 percent of its total revenue, the company said.
Alibaba Group COO Daniel Zhang said: “Through this collaboration, we hope to create concrete benefits for our overseas buyers and sellers by enhancing the user experience and providing greater access to a suite of international e-commerce logistics solutions and products.”
SingPost Group CEO Wolfgang Baier added: “E-commerce logistics is the key enabler to capture the growth in e-commerce in Asia. This strategic investment will help boost our transformation in regional e-commerce logistics and realize our next growth frontier. With the tremendous e-commerce opportunity, the funds from this investment provide SingPost with financial flexibility and enable us to significantly scale up our e-commerce logistics business and build new capabilities as we are poised for growth in the region.”
The Alibaba agreement will also allow SingPost to more quickly expand its regional e-commerce logistics infrastructure and leverage it as a regional revenue stream, especially amid intense pressures from its “rapidly declining” core domestic mail volumes and business, Baier said.
Despite falling demand for traditional postal services, he said SingPost would continue to focus on improving such services to fulfil its obligations as Singapore’s Public Postal Licensee. The company had invested S$100 million to beef up customer service and productivity, including the replacement of its mail-sorting machines and delivery fleet, he said.
SingPost shares surged 11 percent to S$1.72 after the announcement, marking its highest closing value since the company went public in 2003, according to Bloomberg. “There’s definitely synergies between the two companies,” Andrea Isabel, Singapore-based analyst at UOB-Kay Hian, said in the report. “Alibaba doesn’t have their in-house logistics and the partnership will definitely help them. The deal will help SingPost build their presence in China.”