Alibaba's logistics arm, Cainiao, to file for Hong Kong IPO

Cainiao Network Technology Co, the logistics subsidiary of Alibaba (NYSE:BABA) Group Holding Ltd, is expected to file for its initial public offering (IPO) in Hong Kong as early as next week, according to sources close to the matter. The move could potentially make Cainiao one of the first units of the Chinese tech giant to go public following Alibaba's announcement earlier this year that it would split up its business.

The company aims to raise at least $1 billion through the share sale, although precise details regarding the valuation are yet to be determined. While no final decision has been made and details could still change, an application would see Cainiao taking a lead among Alibaba's other units on the path to separate listings.

Cainiao has been working with banks including Citic Securities Co, Citigroup Inc (NYSE:C) and JPMorgan Chase&Co (NYSE:JPM) on the IPO. However, China International Capital Corp withdrew due to conflicts of interest as it is serving as a joint sponsor of J&T Global Express Ltd, another logistics firm seeking Hong Kong listing approval next week.

In related news, Alibaba is reportedly delaying the Hong Kong IPO of its Freshippo grocery chain due to weak sentiment for consumer stocks in China. The capital management committee of Alibaba, which is overseeing the breakup of the sprawling company, recently decided to wait for a more favourable market before proceeding with a Freshippo IPO and will prioritize the listings of other units.

Alibaba co-founded Cainiao in 2013 as the delivery backbone for its then burgeoning Chinese online marketplaces. The unit later followed Alibaba's footsteps into the global e-commerce arena and now handles parcels for millions of merchants and brands on platforms like AliExpress and Southeast Asia's Lazada.

Cainiao, which translates to "rookie" or "amateur" in Chinese, operates over 300 international routes with more than 3,000 logistics partners. The company promises to deliver packages in China within 24 hours and anywhere else in the world in 72 hours.

Following the news report, Alibaba's shares in Hong Kong extended gains, rising as much as 4.4%, marking the biggest advance in almost a month.

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This article first appeared in Investing.com