China Ecommerce Boom Drives $2.5bn Deal For Stake in Logistics Group GLP
By Simon RabinovitchGlobal Logistic Properties, a large Asian warehouse operator, will raise $2.5bn by selling up to a third of its China business to statebacked investors, in a deal that highlights the explosive growth of China’s logistics industry.The investors include a Bank of China subsidiary, private equity firm Hopu and an unnamed Chinese insurance company, GLP said.
The investors will acquire 1.5 per cent of GLP’s Singapore-listed shares and as much as a 34 per cent stake in its wholly owned China subsidiary.
With large chain stores moving deeper into the Chinese interior and a boom in ecommerce creating a need for the rapid delivery of goods throughout the country, logistics has become an investment focus in China.
Warehouse space per capita in China is roughly one-10th that in the US and Britain, and the overburdened infrastructure has made logistic costs nearly twice as expensive in China.GLP has built itself into the leader in modern warehouse space in China, with nearly 9m square metres of completed facilities, giving it a roughly 20 per cent market share.
But with plans to increase new starts by about 24 per cent a year, GLP faces significant upfront capital costs. Domestic competitors such as China South City Holdings have also been catching up.
Jeffrey Schwartz, GLP chairman, said the $2.5bn raised through the stake sale would be used up within two years through new investments. Just three months ago GLP, launched a $3bn China infrastructure fund, which he said had already been 86 per cent allocated.“Nothing compares to the opportunity we have in China in size and scale,” he said. “It’s all supercharged by the growth of ecommerce. We have become the storefront for ecommerce.”
By partnering with top Chinese companies, he said that GLP will have the institutional connections and the access to funds to support its expansion plans. “It’s hard to set a target for 15 years from now. We just want to make sure that we’re the market leaders,”
Mr Schwartz said.The Singapore-listed shares in GLP were sold to the Chinese investors at a price of S$2.76, a 4 per cent discount to their closing price on Tuesday.
But the bigger part of the deal is the sale of new shares in GLP’s China subsidiary for $2.35bn in two tranches. This will give the Chinese investors as much as a 34 per cent stake in GLP’s China arm. China holdings accounted for 63 per cent of GLP’s net asset value at the end of 2013.The deal will also see Fang Fenglei, the influential Chinese financier who heads Hopu, join the board of GLP. It is the second investment to be announced by Hopu since it launched a new private equity fund last year.
The transaction is subject to regulatory and shareholder approval. The name of the Chinese insurance company involved in the deal will be announced after it files with the industry regulator.
