Wang Wei, the soft-spoken billionaire head of SF Express, is finally opening his company to outside investments, a full 20 years after first founding his delivery service business

09.03.2013 19:04

Courier Service Firm Finally Takes Delivery of Outside Investment

For years SF Express resisted taking other people’s money, but a desire to remain an industry leader has seen it accept boxes of cash lately

By staff reporters Zhu Yishi and Zheng Fei

(Beijing) — Wang Wei, the soft-spoken head of SF Express, is finally opening his company to outside investments, a full 20 years after first founding his delivery service business. On August 19, executives at SF Express (Group) Co. Ltd. confirmed the company had entered a strategic investment agreement with state-backed investors Oriza Holdings of Suzhou, Jiangsu Province; China Merchants Group; and CITIC Capital. The three investors will own a little less than 25 percent of SF Express after the deal.This is the first time that SF Express has taken on external investments in its 20 years. People close to the transaction say the total investment of the three organizations was nearly 8 billion yuan. The company is valued at over 30 billion.

SF Express Vice President Wang Lishun said the investors have their eyes on the company’s long-term development, and they will not attempt to alter its strategic direction.

Founded in 1993, SF Express is China’s largest private delivery service. It owns 30 cargo planes, over 5,000 outlets, over 150 transit depots and over 10,000 delivery vehicles. It operates in China, Japan, South Korea, Singapore and the United States. The company’s income exceeded 20 billion yuan in 2012, accounting for nearly 20 percent of China’s total domestic courier business.

Investors have for years been trying to buy into SF Express, but Wang, its founder and CEO, repeatedly said that he was not interested in outside financing and is not in a hurry to launch an IPO. Now, however, he has changed course, showing a willingness to use outside capital to ensure that his company remains an industry leader.

Wang, 42, left his home of Shanghai at a young age to move to Hong Kong with his family. Now he drives from his home in Hong Kong every day to his office in Shenzhen.

“He’s a Buddhist and is very soft-spoken,” an investor who has worked with Wang said. “He’s always cheerful and optimistic, but he’s also assertive and skilled at expressing himself.”

Managing a company with 180,000 employees, Wang possesses a deep understanding of the delivery and logistics industry. His assessments are often deadly accurate, the source said.

Domestic Capital

SF Express spokesperson Chen Huan said the company began negotiations with strategic investors at the beginning of the year, and that it wanted long-term strategic investments, not short-term financing. Company executives were able to reach a consensus with investors over both business models and strategic development.

“Our most fundamental requirement was that they not press SF Express to list,” Wang Lishun said.

CITIC Capital, with US$ 4 billion under management, began negotiations with SF Express at the beginning of the year. Its chairman and CEO, Zhang Yichen, said none of the three investors has plans to exit soon, nor will they pressure SF Express to list in the short term.

Oriza Holdings had been in contact with SF Express for over two years before negotiating the investment this year. Oriza, previously known as Suzhou Ventures, was founded with registered capital of 3 billion yuan and has 21 billion yuan under management. At the end of 2010, it partnered with CDB Capital, the investment arm of China Development Bank, to establish the country’s largest domestic yuan-denominated fund of funds, with the first phase of 15 billion yuan under its belt.

China Merchants Group had previously collaborated with SF Express. This time it invested via subsidiary Merchants Shenzhen Investment Holdings Co. Ltd. Merchants executives said SF Express is expanding its business-to-consumer (B2C) markets, and that the markets SF Express is targeting are the same as those the Merchants Group is eyeing.

Zhang said the three investors can use their resources and channels to help SF Express grow. For example, businesses such as the distribution of high-end foodstuffs by CITIC subsidiary Dah Chong Hong present potential opportunities for growth. Merchants Group also has experience in international logistics that SF Express is branching into.

A venture capitalist said that it is only reasonable that the three state-funded organizations bought into the delivery company. For one thing, the Postal Law explicitly forbids foreign-invested companies from engaging in the domestic document delivery business. That excluded foreign investors. Also, SF Express’ valuation is high, and its capital scale large, meaning that any potential partners would have to be backed by at least 10 billion yuan in capital. Basically, said the investor, the only companies that meet those requirements are major state-owned organizations.

The source said that the price-earnings (PE) ratio of this deal is nearly 25, which is relatively high. SF’s annual growth, however, is nearly 30 percent, which means that based on this year’s performance, the company’s PE is nearly 20, about the same level as major international couriers like FedEx.

What Wang Wants

In 2012, Wang Wei told the media that SF Express would not list in the short term, since once it listed, the company would have to make its major objectives increasing profits and stock prices, which would not be beneficial for long-term strategic investments. He added that IPO requirements for information disclosure would force him to reveal commercial secrets and company strategies, and this is also bad for business. So why has Wang changed his tune?

SF Express has always been simple in share structure. Before the investment, Wang held 99.99 percent of company’s shares, with the remainder held by Yu Guoqiang, former general manager of SF Liaoning and current head of SF Express’ subsidiary airline. Wang will still own nearly 75 percent of the company after the deal, meaning he will remain the controlling shareholder.

The country’s private delivery industry has flourished in recent years in tandem with the rise of e-commerce. SF Express has evolved considerably in the face of fierce competition.