Why did Shunfeng spend 5.5 billion on DHL's supply chain business in China?

On the evening of October 26, Shunfeng announced that it had reached strategic cooperation with DP DHL ( Germany Post DHL Group ) and purchased 100 % of DHL Supply Chain ( Hong Kong ) Co., Ltd. and DHL Logistics ( Beijing ) Co., Ltd. with 5.5 billion yuan in cash to integrate DP DHL's supply chain business in mainland China, Hong Kong and Macao.

5.5 billion yuan, higher than Shunfeng's net profit of 4.77 billion yuan in 2017, and the investment has not yet ended. According to the agreement between the two parties, during the cooperation period, the company will also exchange DP DHL's brand authorization and related service support on the basis of 2.5 % of the target company's actual annual income.

This is a good deal for DP DHL. In 2017, the supply chain business was the only one of DHL's four major businesses that experienced a decline in earnings before interest and tax. The Germans won't lose money by selling their business in China with a large amount of cash and a steady return.

But for Shunfeng, is this a good deal?

In fact, Shunfeng started its supply chain business very early, but mainly focused on medical cold chain and supply chain finance, facing the fields with high value-added services such as automobiles, medical care, consumer electronics and semiconductors. Shunfeng can hardly break the barriers by itself in the short term. DP DHL has rich experience in supply chain management in these fields, can provide market-leading services such as free trade zone logistics, prenatal logistics and clean room, and has expertise in third-party transportation, warehouse management and enterprise customer value-added services.

During the cooperation period, the target company will operate under the joint brand of Shun Feng and DHL. The joint company will be led by Zou Yin, the current chief executive officer of DHL Supply Chain in Greater China, and the existing management team. Shunfeng can not only get the supply chain service support and management experience of DP DHL Group, but also share its high-level transportation and warehouse technical scheme.

In this case, the deal seems to be a good deal, with 5.5 billion yuan for a broader development space in the future. After all, as early as Shunfeng's 2017 performance statement meeting, Wang Wei said that Shunfeng's target is not just a 400 billion traditional express delivery market, but a 12 trillion large logistics market.

Is 5.5 billion expensive or not?

According to the National Post Office statistics, 2017 the National Express business growth fell to 28%, this January-September, the growth rate further slowed to 26.8%, which means that the express business continued for many years of rapid growth is over. Even with a good service level called the Shun Fung, want to achieve high-speed growth is also difficult, so, at this time to expand new business, more like the last resort.

Since its listing, Shun Fung has been working to diversify its business and transform its integrated logistics service provider, which reflects its eagerness to transform itself into an anxious mood. Rather than in the express business to fight a bloody, better to open up a second battlefield, Shun Fung, Tongda department are playing this idea, just shun Fung diversified strategy stalls paved larger, trying in heavy goods, Leng, with the city, international multi-point flowering.

As for the 5.5 billion is not expensive, it depends on the market and time given the answer.

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