Alibaba Logistics Ally ZTO Express Sees Possible IPO in 2017

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China’s ZTO Express, one of Alibaba Group Holding Ltd.’s logistics partners, is aiming to go public in the next two years, while expanding both within China and internationally.

ZTO currently serves 18,000 of China’s 40,000 counties and aims to reach 35,000 within the next five years, Lai Jianfa, ZTO’s co-founder and executive vice president, said in a late-March interview at the Credit Suisse Asian Investment Conference in Hong Kong.

The swift growth of e-commerce is expected to propel China’s express delivery market, which had more than 20 major players in 2013 and another 8,000 smaller ones, according to a report from Deloitte & Touche LLP. Shanghai-based ZTO is among the 10 biggest firms, which together control 87 percent of the market, Deloitte said.

If all goes according to plan, ZTO hopes to stage an initial public offering soon.

“There are definitely plans to take the company public in two to three years, but our focus now is to grow the company to build an enduring business,” Colin Guo, managing director of venture capital fund Sequoia Capital China, said in the same interview with Lai. Sequoia took an undisclosed stake in ZTO in 2013.

Alibaba’s Network

China’s State Post Bureau said in January that the volume of express deliveries in China rose 52 percent in 2014 from a year earlier, to 14 billion. The sector’s revenue rose 42 percent to 204 billion yuan ($32.8 billion).

ZTO is one of several delivery companies and other partners in Alibaba’s China Smart Logistics Network, also known as Cainiao. The network was started in 2013 and is 48 percent owned by the Hangzhou-based Internet giant. China Post joined the alliance last June.

The logistics network is part of Alibaba founder and chairman Jack Ma’s plan to create a delivery network that can reach virtually any point in China within 24 hours. Alibaba has said Cainiao will invest as much as 100 billion yuan over the next eight years to develop and manage a logistics network.

Not Exclusive

ZTO doesn’t work exclusively with Alibaba, but is seeking to capitalize as the Internet giant morphs into a more consumer-driven operation after starting as a business-to-business marketplace.

“Delivery companies are a propeller. We are the strongest force driving Alibaba’s fast development,” Lai said. “Our partnership with Alibaba will only become more synchronized.”

ZTO also received approval last year to start an international delivery service, Lai said. In September, it signed an agreement with France’s national postal service to start express delivery between China and Europe, which debuted earlier this month, Lai said.

(An earlier version of this story was corrected for wrongly spelling official's name.)

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