SF Holdings' $6.6b reverse takeover set in motion

The historically media-shy Chinese logistics giant is looking to fast-track its way onto the market with the help of a Shenzhen-listed rare earth metals firm.

Packages and rare earth metals make an unlikely combination but for S.F. Holdings Group, China’s largest express delivery firm, it has unlocked a backdoor Shenzhen listing via a Rmb43.3 billion ($6.6 billion) reverse takeover.

In a stock exchange filing on Monday, little known Maanshan Dingtai Rare Earth & New Materials said it planned to take over privately run S.F. in an asset-swap transaction that will give "China’s Fedex" access to public capital markets at a time when competition in its field is intensifying. 

S.F. Holdings's chairman Wang Wei will become the controlling shareholder of the listed unit with a near-55% stake upon completion of the reverse merger.

In a reverse merger a private company is ostensibly purchased by an already listed firm but is in practice the acquirer since it is issued a majority of the listed company's shares as part of the deal.

Maanshan Dingtai said it also plans to raise up to Rmb8 billion in a private placement of shares with 10 private investors to fund the upgrade of logistics and infrastructure facilities, including Rmb2.7 billion of spending on air transportation-related equipment.

S.F.’s planned fast-track listing comes at a time when the Chinese securities watchdog is keeping a tight rein on new initial public offerings and mulling whether to curb backdoor listings by private companies lured by higher A-share valuations. 

More than 700 companies are currently queued in the A-share IPO pipeline and reverse takeovers offer private companies an opportunity to bypass the lengthy IPO process. They also tend to draw less regulatory scrutiny than IPOs although they are still subject to regulatory approvals.

“S.F. has been looking for a shell company for a long while. It’s not easy at all [to find a suitable one]. Backdoor listing is way faster than waiting in the long IPO pipeline, which would take the company about three years [to go public],” one Beijing-based investment banker familiar with the matter told FinanceAsia.

“Time is very precious for S.F., in particular after some of its domestic competitors already went public,” added the banker, who expects the deal to complete this year.


Smaller domestic rivals STO Express and Alibaba-backed YTO Express announced plans to go public with reverse takeovers worth Rmb16.9 billion and Rmb17.5 billion, respectively, in December and March.

“That increases S.F.’s incentive to go public. As a market leader, S.F. would want to have a listing status after smaller express delivery firms have gained it,” Kevin Leung, director of global investment strategy at Haitong International Securities, told FinanceAsia. “Getting such a status would make easier for the company to conduct other financing activities.”

Founded in 1993, S.F. has gradually built a strong logistics network covering over 2,000 cities and county towns across China and attracted big names as its long-time clients, such as Apple and Huawei, according to its website and Dingtai's filing.

The Shenzhen-based courier firm is also actively expanding overseas, with operations already in countries such as the US, Japan, Singapore, and Australia. As of July 2015, it had about 340,000 employees with 160,000 vehicles and 19 self-owned air freighters.

The firm’s success has been stoked by the explosive growth in online shopping in mainland China, especially after the development of Alibaba’s online marketplaces Taobao and Tmall, which has catalysed the country’s C2C and B2C e-commerce businesses.

According to the state post bureau, China’s courier industry delivered 20.67 billion packages across the country last year, up 48% year-on-year. Its income over that time grew by 35% to Rmb277 billion.

Meanwhile, Chinese e-commerce giants such as Alibaba have been setting up their own logistics arms, which is pushing down prices and squeezing the margins of more traditional express delivery firms. The average delivery cost fell by about 35% from Rmb20.7 per parcel in 2011 to Rmb13.4 per parcel last year, official data shows.


S.F., in contrast to its wide logistic presence and rapid growth, for years appeared distant to media or even external investors. In its 23-year history the firm has only sought external capital once. In 2013, a consortium of investors, including Citic Capital and China Merchants Group, invested Rmb8 billion ($1.22 billion) in the company to gain a 25% stake.

Its mysterious, low-key founder and chairman Wang has also shunned media coverage. In a rare interview with the Chinese-language newspaper Yang Cheng Evening News in 2011, he said the company wasn’t planning an IPO in the near term as it would make the company appear “fickle”.

“S.F. does need capital, but we cannot go public [purely] for money,” he said. “As after the listing, the company will become a money-making machine. Movements in stock prices will make us nervous…We have to be responsible for shareholders and ensure the stock continue to rise. The profit will become the only goal of the company.”

According to Monday’s filing, S.F. recorded revenue of Rmb47.3 billion last year, up from Rmb38.2 billion in 2014, while its net profit also rose from Rmb1.08 billion to about Rmb2 billion over the same period.

Huatai Securities, Citic Securities, and China Merchants Securities were the financial advisers for the transaction.

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