HONG KONG -- Having poured billions into major e-commerce platforms in Southeast Asia, Chinese tech conglomerate Alibaba Group Holding has furthered its plans to build an empire outside the mainland by creating a pan-Asia logistics unicorn.
Two ground freight startups it backs, 58 Suyun and GoGoVan, announced Tuesday that they would be merged to become the largest intra-city logistics platform in Asia, covering over 110 cities with more than 1.2 million registered drivers in the network.
The new entity will be valued at over $1 billion, and GoGoVan co-founder Steven Lam Hoi-yuen will be CEO. The company will operate under the brand "GoGoVan" outside of mainland China and "58 Suyun" on the mainland.
Established in September 2014, 58 Suyun is the moving-services arm of Tianjin-based 58 Home, a directory for online-to-offline services such as cleaning, babysitting, repairing, and beauty care.
Alibaba has backed 58 Home since October 2015 when it completed its first round of post-seed financing of $3 billion. New York-based private equity firm KKR and Shenzhen-based Ping An Insurance Group are among its investors. It is also a subsidiary of 58.com, an classified advertisement website listed in New York that has China's Tencent Holdings as the largest shareholder with a 23% stake.
Started with just 20,000 Hong Kong dollars ($2,556) in July 2013, GoGoVan is Hong Kong's homegrown app-based logistics platform that now operates in 14 locations in Asia, including Singapore, Taiwan, Korea, and India. It has a presence in eight Chinese cities under the brand name "Kuaigou Express."
Alibaba has taken a minority stake of no more than 30% in GoGoVan since May 2016 through its $130 million nonprofit Hong Kong Entrepreneurs Fund launched two years ago. The investment was part of GoGoVan's third round of fundraising joined also by private equity firm New Horizon Capital, Taiwanese venture capitalist Hotung Investment Holdings, and media heavyweight Singapore Press Holdings.
Its early investors include Singapore's private equity Centurion and Beijing-based social network Renren.
Chen Xiaohua, CEO of 58 Home, told reporters on Tuesday that the merger was hastened by the active participation of Alibaba. "Alibaba is the only cornerstone investor that requested to become the shareholder of this new company because it believes logistics fits well into its strategy," said Chen.
The Hangzhou-based company, owned by China's richest man Jack Ma Yun, had recently led a $1.1 billion investment in Indonesia's leading e-commerce platform Tokopedia, after upping its stake in another regional rival, Lazada, to 83% for $1 billion in June.
"With the merger, we could obtain more resources to prepare for our expansion in Southeast Asia," said Lam at the same briefing, adding that the new GoGoVan could scale up to reach 300 cities in China in the medium term.
Lam revealed that the company, now profitable only in a few cities, could turn around within two years. "At this stage, we aim to gain market share, while profitability is not our key concern," said Lam, noting the company only started charging drivers on its network last year while eyeing an initial public offering.
"With the new reform of the Hong Kong stock exchange, the two new boards coming up, I think to do an IPO makes perfect sense for us. It will be one of the opportunities that we seriously consider," said Lam. But he emphasized that going public would just be one of the many options to help the company reach its goal of becoming a global brand in the short-distance delivery market.
He declined to comment on the shareholding structure of the new entity, but suggested the mainland company had a larger stake.
Chen said the new GoGoVan is targeting to complete its strategy for Southeast Asia in two years and the next stage will be focused on developing new energy vehicles.