By BAI Fan

JD Logistics, a spin-off from JD.com, is to acquire Deppon Express, initially taking control over 66.5 percent of Deppon Express for an undisclosed amount. According to China’s securities laws, JD Logistics will then offer to buy all the remaining shares and Deppon will delist. Deppon will continue to operate independently.

Deppon stock has been trading at around 10 yuan (US$1.50) a share for some time, about a third of the highs seen shortly after the company’s 2018 debut, and implying a market cap of 13 billion yuan. JD Logistics, which went public in Hong Kong last year, is worth over 100 billion yuan.

Deppon is known for shipping bulky items – think of long-distance moving or ski shipping – which will be needed if JD Logistics is to handle more furniture and home appliances. Deppon has 140 warehouses for bulky items. The deal will almost triple JD’s capacity for such deliveries. GONG Fuzhao, a logistics consultant, said Deppon’s services overlap those of JD Logistics but are not exactly the same, which will allow JD Logistics to increase both its volumes and product offerings.  

The takeover is a bailout for Deppon Express, which switched focus to bulky items shortly after its IPO. Large items are challenging for next-day (or same-day) delivery and the shipping industry is exceedingly competitive. Deppon has a debt-to-asset ratio of 60 percent and profits were falling by two-thirds.

The deal is yet to be approved by China’s antitrust authorities. If it is, it will be the third high-profile acquisition by JD Logistics in a year. It bought a controlling stake of Dada Nexus last May, which specializes in local on-demand delivery, and acquired the air cargo firm KY Express three months later.