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ZTO Express Targets Largest Chinese Company IPO in U.S. This Year

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ZTO Express is planning what could be the largest initial public offering by a Chinese company in the United States in 2016 and the biggest since Alibaba’s IPO two years ago.

The Shanghai-based logistics company wants to sell 72.1 million American depository receipts (ADRs) at a price of between $16.50 and $18.50 for each, according to regulatory filing made on Friday.

At the upper price, ZTO Express would raise more than $1.3 billion in the IPO. The amount could further rise to $1.5 billion in the event of an overallotment option being fully exercised. The IPO could be the largest by a Chinese company in the U.S. this year and the largest since 2014 when Alibaba Group Holding went public. It would also rank seventh all-time among Chinese companies’ IPOs on an American exchange, based on Bloomberg data.

Ecommerce giant Alibaba was able to raise $25 billion in its offering two years ago – the amount was the highest of such ever recorded.

Founded in 2002, ZTO Express is a major player in China’s thriving online-shopping industry. It delivers packages for online retailers such as Alibaba and JD.com. The company revealed in its IPO prospectus that the number of packages it handled increased 62 percent last year to 2.9 billion.

China boasts the largest express delivery market in the world. The market research firm iResearch said some 21 billion packages were delivered in the country in 2015. The total parcel volume was about 1.5 times the total in the U.S.

Of all express parcels delivered in the Asian country in the first quarter of this year, ZTO Express handled 827.7 million packages which accounted for around 14 percent, according to iResearch data quoted in the IPO prospectus. It has approximately 74 sorting hubs and 7,700 network partners.

The logistics company’s revenue surged to RMB 6.1 billion ($915.8 million) in 2015, from RMB 3.9 billion in the year before that. Net income was RMB 1.3 billion ($200.4 million). Revenue in the first six months of 2016 was $638.8 million, yielding a net income of $115.1 million.

Earlier in the year, sources informed Thomson Reuters’ IFR that ZTO Express was contemplating an American listing for speedy completion and to enable its existing shareholders monetize their holdings more easily.

The major Chinese logistics company becomes the latest company from China to aim at attracting Western investors based on growth prospects in the country. The offering will also enable it to side-step all the red tape connected to the launching of IPOs in mainland China.

ZTO Express said it will use proceeds from the offering to buy land and more trucks. The takings would also be used to build facilities, buy sorting equipment and for general corporate purposes.

In 2015, a consortium including private equity firm Warburg Pincus and Hong Kong’s Hillhouse Capital Management invested in the Chinese logistics company.

ZTO Express will be listed on the New York Stock Exchange under the ticker ZTO. The lead underwriters for the offering are Morgan Stanley and Goldman Sachs Group Inc.