SF to go public – through the back door

If they won’t let you in through the front door, go ’round to the back. That seems to be the only course open to China’s big express companies as they look to list on the Shanghai Exchange

While the focus of the air cargo media in the last few days has been on FedEx’s acquisition of TNT – public companies doing a major financial deal very much in the public eye – the express industry news in China is about a company that would like to go public.

Privately-held SF Express, the largest express company in China, has plans to become even bigger, and, not surprisingly, would like to raise money to fund those plans. The obvious solution is an IPO, but, following last year’s stock market madness, Chinese regulators have clamped a tight lid on new listings. There is now a years-long waiting list for A-listing, and SF would have to get in line behind more than 700 other companies already on the list.

What to do? For SF the answer is the same as it was for competitors YTO Express and Shentong (STO) Express – try the back door.

Backdoor listing is a process in which a company like SF gives up on the IPO process and instead takes over, or has itself taken over by, an already-listed company – usually one that is struggling. In this case, SF Holdings, parent of SF Express, is planning a reverse takeover of the express company by Maanshan Dingtai Rare Earth & New Materials Ltd, through an asset swap and the issuance of new shares.

If granted regulatory approval, Maanshan Dingtai will acquire SF Express, with the combined firm valued at RMB43.3 billion (US$6.6 billion). Control of the new company will stay with Wang Wei, founder and Chairman of SF Express. SF reportedly says it plans to use the proceeds from deal to purchase freighter aircraft and upgrade its IT infrastructure and cold-chain and warehouse facilities. SF also recently received regulatory approval to build a new airport and express hub near Wuhan – a plan no doubt contingent upon raising cash.

Whether the deal will be allowed to proceed remains to be seen. Chinese regulators have recently taken a tougher stance against backdoor listings, but, so far at least, seem to be leaving that door open to companies thought to be important to the country’s economy.