Cosco Shipping Logistics, JD Logistics and Orient Overseas International Ltd. (OOIL) indirect subsidiary “Gold Talent” have inked a complex joint venture deal to fund online international supply chain platform Eshipping with, ultimately, US$44.7 million of capital.
The parties will set up the joint venture with RMB255 million (approximately US$38 million) in Shanghai. After the initial cash contribution, Gold Talent will invest RMB66 million representing a 25.88 percent equity stake; Cosco Shipping Logistics will invest RMB54 million representing a 21.18 percent stake; and JD Logistics will invest RMB135 million representing 52.94 percent.
It’s a complex deal as Eshipping is now owned in near-equal proportions by China Shipping, two Cosco Shipping subsidiaries and the Eshipping management company. So there’s some shuffling and swapping of assets to be done. There are also “employee share ownership platforms” to take into account. So a complex series of corporate transactions will take place over time. At the completion of the restructuring and joint venture formation, Eshipping will have RMB300 million (US$44.7 million) in registered capital broken down as follows:
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Gold Talent – RMB66 million for a 22 percent stake
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Cosco Shipping Logistics – RMB54 million for an 18 percent stake
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JD Logistics – RMB135 million for a 45 percent stake
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JV ESOP – RMB 33 million for an 11 percent stake
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Eshipping ESOP – RMB 12 million for a 4 percent stake
Eshipping was established in July 2014 to offer an online platform for logistics, warehousing, courier services, logistics financing, trading and other market resources. It was tasked with providing small- and medium-sized enterprises and cross-border retailers a one-stop logistics service for landside transportation, ocean freight forwarding, air freight forwarding, overseas warehousing and supply chain financing, among others. Eshipping has generated losses for the last two years. In 2017 it lost RMB 2.75 million (US$409,000) and in 2018 it lost RMB 10.8 million (US$ 1.61 million).
Commenting on the rationale for the deal, containerized ocean shipping company OOIL stated that it will allow the group to leverage advanced technology to gain wider exposure in the e-commerce segment and experience in handling business-to-business and business-to-customer international ecommerce logistics and to drive future growth.
Two directors will be jointly nominated by Gold Talent and Cosco Shipping Logistics. Three directors will be nominated by JD Logistics.
Gold Talent is a wholly owned subsidiary of OOCL Logistics, a wholly owned subsidiary of OOIL. Cosco Shipping Logistics is a wholly owned subsidiary of China’s Cosco Shipping. Cosco Shipping Logistics is a third-party logistics company in China offering contract logistics, project cargo services, warehousing and other supply chain management services.
China Shipping Group offers ocean shipping services and it is also a subsidiary of China Cosco Shipping. Cosco Shipping Technology, another Cosco Shipping subsidiary, supplies advanced intelligent transport computer and hardware services. JD Logistics is a subsidiary of JD.com, which is China’s largest retailer with over 300 million active customers.
JV ESOP is a limited partnership to be set up by the JD Logistics Group as an employee stock ownership platform for employee share incentive purposes. Eshipping ESOP is similar to the JV ESOP but for Eshipping employees.
The deal is subject to regulatory approvals from the Chinese authorities.