SF Express in Talks to Acquire Stake in J&T Express, Amplifying International Growth Ambitions

SF Express, one of China’s leading courier companies, is reportedly in negotiations to acquire a 1%-2% stake in J&T Express, a global delivery firm originated from Southeast Asia. The specifics of the investment and cooperation details are still under discussion, according to LatePost.

J&T Express was founded in 2015 by Li Jie, the founder of OPPO’s business in Indonesia, and grew to become the largest express company in Southeast Asia within four years. After returning to China in the second half of 2019, J&T Express reached the fifth position in the Chinese express industry within three years.

However, as the growth potential in the Chinese express industry has diminished, J&T is once again turning its attention overseas. A similar shift in focus has been noted for SF Express, which has identified internationalization as its second growth curve after a failed attempt at downward integration in 2021.

The partnership makes strategic sense for both companies, who are eager to tap into the global market. J&T Express brings to the table its overseas customer resources, as well as its end-delivery networks in Southeast Asia, the Middle East, and South America. Meanwhile, SF Express has the largest fleet of cargo aircraft in China and an extensive aviation trunk network. By joining forces, they can seize this opportunity more quickly without spending three to five years building infrastructure from scratch.

In the past, J&T Express had leveraged its aggressive acquisition strategy to expand its footprint in China. In 2019, J&T acquired Longbang Express to gain a license to operate express business in China. In September 2021, it bought Best Express for 6.8 billion yuan, significantly enhancing its infrastructure and gaining access to e-commerce orders from the Alibaba Group. However, the acquisition of Fengwang Express, a budget express business under SF Express, is unlikely to significantly enhance J&T‘s business.

According to an insider, the essence of this transaction is for J&T to establish a deeper trust relationship with SF Express and seek more cooperation. If the deal is reached, J&T will receive additional funding. “Buying Fengwang is almost like spending no money,” said the insider.

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SF Express, as the largest cargo airline in China, operates nearly a hundred cargo aircraft and has cargo flights to and from Europe, North America, Southeast Asia, and other regions. These destinations are also popular among J&T‘s overseas customers. Research from CITIC Securities showed that SF Airlines’ trunk load rate was 51%, lower than FedEx’s 61% and UPS’s 73%, theoretically, SF’s planes can carry more packages.

Currently, J&T is refocusing its efforts on the global market. This shift comes as the company’s growth in its domestic business has slowed down. In 2022, J&T was unable to further advance its market share and ranking in China. It had hoped to continue its cooperation with Pinduoduo, subsidizing merchants to expand its market share, and investing the funds and profits from the Southeast Asian market in China to build a basic network and achieve scale effects. However, this plan was only effective for a while. In the past two years, Pinduoduo has introduced more logistics partners, and the number of packages carried by J&T has not increased significantly. Its share of Pinduoduo‘s total daily package volume has remained around 20%.