China's SF Holdings is set to acquire a 51.5% stake in Hong Kong's Kerry Logistics in a HK$17.5 billion (US$2.3 billion) deal, expected to create the biggest logistics group in Asia.
SF Holding, which operates top Chinese integrated logistics firm SF Express, said the move would help expand its global reach and allow it to further compete with logistics titans in the industry.
The stake acquisition at Kerry Logistics will also push SF Express' international footprint and freight forwarding operations utilizing Kerry's extensive Southeast Asia network and its strength on the US and European trade lanes.
“Air and ocean freight forwarding and customs clearance capabilities can improve SF Holdings’ end-to-end supply chain solutions, combining the company’s existing international cargo shipping capabilities to further strengthen the international transport business,” SF said.
It added that by combining its air cargo volumes with Hong Kong's Kerry Logistics, the company would be able to “obtain better bargaining power against external airlines.”
SF also noted that the deal would open up its own air capacity to Kerry Logistics to increase loading rates through its SF Airlines — China’s largest freighter operator with nearly 60 aircraft in its fleet.
The logistics firms have undergone rapid expansion in recent years on the back of China’s e-commerce boom, becoming one of the largest last-mile delivery firms for Chinese e-commerce giants Alibaba and JD.com.
Separate entities in Mainland, HK, Macau operations
In a statement, Kerry Logistics said the cooperation will bring together the core competencies of SF Holding and Kerry Logistics Network across multiple verticals “to create a leading Asia-based global logistics platform to meet ever-changing demands.”
“Under the strategic cooperation, Kerry Logistics Network will be positioned as S.F. Holding’s platform for international business. S.F. Holding and the Company will also collaborate with each other in Greater China to better align their respective businesses,” the Hong Kong-based Kerry said.
It added that by tapping into different customer segments, S.F. Holding and Kerry Logistics Network will “coexist as separate entities” in Mainland China, Hong Kong and Macau.
“The Company will continue to grow its logistics businesses, both in terms of scale and coverage. The partnership is expected to create significant synergies to boost both companies’ growth and leadership in the logistics sector with clear business focuses and complementary strengths to bring value to investors,” Kerry added.
SF Holdings had US$3.4 billion in gross revenue in 2019 and Kerry Logistics’ sales were US$5.3 billion.
SF chairman Dick Wong was quoted in reports as saying that the deal was the culmination of four years of negotiations.
“The majority shareholder [Kerry Holdings] has trusted SF Holding enough that they are willing to relinquish control in the group, as we both feel that there is a genuine need to collaborate [amid the quickly evolving market],” Wong said.
Meanwhile, Kerry Logistics noted that subsequent to the completion of the proposed transaction, Kerry Logistics Network’s listed status on the Hong Kong Stock Exchange will remain unchanged.
“The Kerry Group of companies will still hold a significant interest in the Company, which will continue to operate under the “Kerry” names with a clear brand identity and be managed by its current core leadership team across all markets,” it added.