By Julie Zhu and Kane Wu
HONG KONG (Reuters) – New York-listed Best Inc, a Chinese logistics firm backed by e-commerce giant Alibaba Group Holding Ltd, is considering a sale as part of a strategic review, six people with knowledge of the matter said.
With the endorsement of Alibaba, its biggest shareholder, Best has tapped financial advisers to explore options as its shares have been underperforming and are worth a fifth of its IPO price in 2018, two of the people involved in the discussions said.
Billionaire Jack Ma’s Alibaba, which owns 33% of the firm, as well as Best founder and CEO Johnny Chou, who has a 11% stake on a fully diluted basis, could both end up selling their stakes, five of the people said.
Best’s stock was up 8.8% in morning trade in New York on Wednesday, after having jumped as much as 14.6% earlier in the session.
No formal sale process has been launched, and the company and Alibaba have not decided which option to take as the strategic review is still underway, cautioned the individuals, including two who were approached about a sale.
The people declined to be named as the information is confidential.
A Best spokeswoman denied that a sale was under consideration. She said Chou continued to believe in the “bright future and long-term value” of the company’s integrated smart supply chain and logistics solutions, and had no plan to sell his stake.
The company, which has a market value of $790 million, did not comment on other issues including whether it was conducting a business review.
Alibaba said in an emailed statement the information was incorrect, but did not elaborate.
The Best discussions are happening against the backdrop of a regulatory crackdown by Chinese authorities on Ma’s business empire including an anti-trust probe of Alibaba and sharpening scrutiny of its financial affiliate Ant Group.
Reuters was unable to determine whether the potential sale is linked to the probe.
The e-commerce group started considering a stake divestment late last year after it found it difficult to integrate Best with other logistics companies under its portfolio, two of the people involved in the discussions told Reuters.
Best tapped advisers to suggest strategic options towards the end of 2020, and they have approached a number of buyers including domestic delivery major S.F. Holding Co Ltd and private equity firms for the sale of the stakes, they said.
One of the potential buyers said his firm had received what he described as a deal “teaser” about a sale of shares by Best towards the end of last year and later about fundraising for one of its units.
S.F. did not respond to a request for comment.
Other options the company is considering include fundraising for its freight delivery unit, three of the sources said. Best could also sell its finance leasing business, one said.
The deal, if launched and completed, will add to a logistics sector consolidation in China. Reuters reported in December retailer JD.com and Carlyle, among others, are bidding for South Korean CJ Group’s China logistics business.
Best was founded in 2007 by former Google executive Chou and debuted in New York in 2017. With a 12% share of the Chinese express delivery market in 2019, it is one of several couriers that work with Alibaba’s logistics division Cainiao.
The company’s shares fell nearly 70% over the past 12 months, as of Tuesday’s close, as its earnings have been hit hard by the fallout from the COVID-19 pandemic. In comparison, the S&P/BNY Mellon China Select ADR Index, which tracks Chinese firms listed in New York, has gained 45% over the same period.
Reuters reported in August that Best was seeking a Hong Kong listing for its express delivery and freight delivery businesses, keen to boost its valuation and establish an investor base closer to China.
But the listing prospects have been dented by its falling stock price and weak quarterly results, said the two people cited earlier.
(Reporting by Julie Zhu and Kane Wu; Editing by Sumeet Chatterjee, Carmel Crimmins and Ramakrishnan M.)