This undated file photo shows a Kerry Logistics truck in the Hong Kong Special Administrative Region. (PHOTO / BLOOMBERG)
SF Holding Co, one of China’s largest express delivery and logistics companies, is seeking to acquire control of tycoon Robert Kuok Hock Nien’s Kerry Logistics Network Ltd in a HK$17.6 billion ($2.3 billion) deal, in what could create Asia’s largest logistics group.
The firm, also known as SF Express, plans to acquire a 51.8 percent stake in Hong Kong-listed Kerry Logistics at HK$18.8 per share, according to a joint statement to the Hong Kong Stock Exchange on Wednesday.
There will also be a special dividend of HK$7.28 per share upon completion of the HK$13.5 billion sale of some warehouse assets to Kerry Logistics’ parent company. Shareholders who accept SF’s offer will receive HK$26.08 per share, comprising the offer price of HK$18.80 per share and the special dividend of HK$7.28 per share. This represents an 11 percent premium to the last closing price since the Shenzhen-listed company suspended its trading on Friday.
William Ma Wing-kai, group managing director of Kerry Logistics Network Ltd, called for “cooperation” from minor shareholders to sell their shares to essentially get the deal done
The deal will reduce the shareholding of Kerry Properties in its spinoff, Kerry Logistics, from 40 percent to about 20.2 percent.
William Ma Wing-kai, group managing director of Kerry Logistics Network Ltd, called for “cooperation” from minor shareholders to sell their shares to essentially get the deal done. As SF Holding looks to pay in cash to acquire 931.21 million shares of Hong Kong-listed Kerry Logistics through a wholly owned unit, the deal may fall through if the total share sale is less than 336 million shares.
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SF Holding expressed its confidence in the deal, as the offer price plus the special dividend are attractive, it said. The deal is expected to take about six months in satisfying the pre-conditions such as passing an antitrust review, and the offer period is expected to begin in the final quarter of the year.
Ma described the deal as a collaboration rather than a takeover at the media conference in Hong Kong on Wednesday. He stressed that Kerry Logistics’ listed status on the Hong Kong Stock Exchange will remain unchanged, and the company will continue to be managed by its current core leadership team across all markets.
The deal would give birth to the Asia’s largest logistics group, which definitely would be a win-win scenario for both sides, Ma added.
Kerry Logistics also plans to sell some warehouse assets for HK$13.5 billion and its Taiwan business. Kerry Logistics proposes a special dividend of HK$7.28 per share conditional on the completion of the warehouses sale.
SF Holding founder and Chairman Wang Wei told the media conference that the two firms have been in talks about the deal for almost four years. The ever-changing market urged the two companies to join forces and make a concerted effort. Under the strategic cooperation, Kerry Logistics will be positioned as SF Holding’s platform for international business.
On Wednesday, SF REIT lodged an application for a Hong Kong listing. Chen Fei, chief strategy officer at SF Holdings, said the company aims to sell its heavy assets via the IPO and switch to a light-asset management model, making the company in tune with a big trend in logistics business that puts more focus on tech. This also explains why the deal will also include the sale of some of Kerry Logistics’ warehouse assets, Chen added.
“An investment into Kerry Logistics strengthens SF Holding’s overseas presence. SF has proved the success of its direct models and stands out from the competition,” Thomas Chong, equity analyst at Jefferies in Hong Kong, wrote in a research report on Wednesday.
“The deal would help SF boost its distribution network and supply-chain services as it gains a footprint across Asia. We believe Kerry Logistics would become SF’s primary vehicle for international expansion. From a sector perspective, we view it as a story with industry parcel volume maintaining solid momentum backed by the secular trend in online shopping,” he added.
Kwok Ka-yiu, Hong Kong-based vice-president of Zhenro Asset Management, said the two companies share similar business philosophy and management philosophies, and the two have earned a reputation for their customer-oriented service rather than sacrificing margins and keeping prices low in their quest for market share. “This is what makes them come together and join hands,” he added.
Despite some overlap in their businesses, Kwok believed Kerry Logistics’ strategic value lies in its experience in customer service management, the sheer number of warehouses it owns, as well as its leading presence in Southeast Asia, especially the Thailand market. “The partnership will create significant synergy. That’s why SF is willing to pay premium for the deal,” he said.
Established in the southern Chinese port city of Shunde in 1993 by Wang Wei, SF Holding went public in Shenzhen at the end of 2016.
Share price of SF Holding in Shenzhen shot to the 10 percent upper limit to close at 117.10 yuan as it resumed trading on Wednesday. Kerry Logistics in Hong Kong jumped 5.54 percent at HK$24.75.
The benchmark Hang Seng Index increased 1.91 percent, or 562.53 points, to finish at 30,038.72 points, while the Shenzhen Component Index advanced 2.12 percent, or 331.68 points, to close the final trading day of the Year of the Rat at 15,962.25 points.
With Bloomberg inputs
