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Alibaba doubles down on logistics with $1.4B investment in Chinese courier ZTO

Alibaba is doubling down on logistics after it led a $1.38 billion investment

Alibaba is doubling down on logistics after it led a $1.38 billion investment in Chinese courier firm ZTO Express alongside Alibaba logistics affiliate Cainiao.

ZTO went public on the NYSE in 2016 raising $1.4 billion from what was the year’s largest IPO in the U.S. The Shanghai-based company claims to be one of China’s largest logistics firms via a partner-based network. Its clients include Alibaba and rival e-commerce firm JD.com. There’s plenty more overlap between the two, ZTO CFO Huiping Yan previously spent two years working for Cainiao.

Alibaba, Cainiao and other undisclosed investors will buy around 10 percent of the company through the deal, which is expected to be completed in June. ZTO’s stock price closed at $17.30 on Friday (before the long weekend) which represented an all-time high since its IPO in October 2016, when it opened at $18.40 before dropping 15 percent on day-one.

The deal is focused on Alibaba’s ‘new retail’ version which merges e-commerce and offline retail. The idea is to marry the speed and ease of e-commerce with the advantages of brick and mortar, such as being able to touch and feel products and customer care. Alibaba has already introduced hybrid stores in parts of China, and fast logistics represents an important part of the plan.

Alibaba said in a statement that the investment will “deepen their collaboration” between ZTO, Cainiao and Alibaba.

“This investment will enable Cainiao and ZTO to supercharge joint innovation and development to accelerate digitalization of the industry,” Cainiao President Lin Wan said in a statement.

Cainiao was started in 2013 by Alibaba and eight other backers to bring organization in Chinese logistics, particularly around e-commerce deliveries. Last year, Alibaba agreed to pay over $800 million to take majority ownership in the business, which works closely with the Chinese firm’s business units and services to enable fast delivery. Cainiao is valued at around $20 billion based on its most recent fundraising activity.

Despite a large IPO, ZTO has attracted controversy. U.S. pension fund Birmingham Retirement and Relief System sued the business alleging that it exaggerated profit margins to lure investors to its listing in 2016. The company has denied the claims.

  • This article originally appeared on TechCrunch.

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