Rapid growth is a capital-intensive feat for Chinese express carriers, and although the obvious solution is an IPO, in China that is not always a timely option. Regulators intent on facilitating a stable market after last year’s turbulent fluctuations have increased requirements and scrutiny for new listings. Companies unwilling to jump on a waiting list behind more than 700 other companies have another option though, a backdoor listing. Three express companies have already found their matches and are in various stages of completing reverse merger deals, Shentong Express, YTO Express, and SF Express—but today a newcomer, little-known Yunda Express joins the club, with its intent to be acquired in a US$2.7 billion deal by Shenzhen-traded Ningbo Xinhai Electric.
Like its compatriots, Yunda has in essence agreed to be taken over by an ailing listed company. In this case, the express company is planning a reverse takeover by Ningbo Xinhai Electric (a manufacturer of disposable lighters) through an asset swap and the issuance of new shares.
But what exactly is Yunda, and do it have ambitions to develop a freighter fleet of its own to provide lift for its express delivery services?
Yunda traces its humble beginnings to $75,000 in start-up capital from a Shanghai-based father and son duo back in 1999. Today the company is still under the control of the Nie family, which, according to a company statement, will continue to own and manage 70% of the shares following Yunda’s takeover by Xinhai. Yunda’s growth has been explosive in recent years as e-commerce fueled the development of a comprehensive delivery network across China’s eastern provinces of Shanghai, Zhejiang and Jiangsu, where it no has more than 1000 service sites.
Profits for the company have been healthy as well, with $16.2 million reported in 2014, and $19.5 million in 2015. As for the prospect of seeing aircraft with Yunda livery take to the skies, no application has been filed with the CAAC. However, given that the backdoor listing is valued roughly the same size as the listings of STO ($2.5 billion) and YTO ($2.7 billion), and just under half of goliath SF Express’ ($6.5 billion), it does seem plausible.
No timeline regarding the deal’s approval has been given, but Chinese regulators seem likely to support backdoor listings for companies belonging to industries the government deems vital, like express delivery. A quick checkup on the other recently announced reverse mergers involving express delivery companies reveals that only Shentong Express has closed its reverse takeover with pipe and valve producer, Zhejiang IDC Fluid Control Co Ltd. YTO Express and SF Express, which announced deals in March and May, respectively, have yet to receive approval.Like This Post