PE-backed ZTO Express raises $1.4b in US IPO

The company announced it would sell 72.1 million American Depository Shares (ADS) at $19.50 apiece, having previously indicated the shares would be priced at $16.50-18.50. A further 10.82 million shares could be added to the offering if underwriters fully exercise the overallotment option.

It also represents the largest US IPO by any company so far this year and is the fourth-largest offering on record by a PE-backed Chinese company on a US exchange. Alibaba is the runaway leader at $25 billion. ZTO can claim some association with the e-commerce giant, as one of its dozen or so logistics partners.

Warburg Pincus currently holds a 6.1% stake in ZTO while Sequoia Capital has 5.6%, according to an earlier filing. They will be diluted to 1.5% and 1.4%, respectively, on completion of the IPO. Gopher China S.O. Project - which is ultimately controlled by Gopher Capital, with Sequoia providing advisory services - would drop from 1.6% to 0.4%. Gopher is the asset management division of Noah Holdings.

Warburg Pincus was the major participant in ZTO's $300 million Series A round of funding last year, contributing $175 million. Gopher invested $45 million at the same time, with Hillhouse Capital committing $50 million and Standard Chartered Private Equity putting in $30 million. Sequoia was an earlier investor in one of ZTO's onshore subsidiaries; it has held a board seat since 2013.

Founded in Shanghai in 2002, the company covers 96% of China's cities with a range of services targeting the e-commerce and printing industries.

It claims the fastest growth rate among the five largest Chinese express delivery companies as of the end of 2015, with parcel volumes growing at a compound annual rate of 80.3% from 2011 to 2015. Parcel volumes for the six months to June totaled about 1.9 billion, representing a 58% year-on-year increase for the period. In terms of parcel volumes, the company had 14.3% market share in China's express delivery space, according to iResearch.

Revenue increased from RMB3.9 billion ($585 million) in 2014 to RMB6.1 billion in 2015. Operating profit reached RMB1.5 billion in 2015, up from RMB600.3 million the previous year, while net income climbed from RMB406 million to RMB1.3 billion over the same period.

The IPO extends a string of recent planned liquidity events for Chinese logistics companies. This includes two reverse mergers in Shenzhen, by SF Express and YTO Express, respectively.

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• Topics
• Greater China
• IPO
• Support services
• Consumer
• Warburg Pincus Asia
• Hillhouse Capital Management
• Noah Holdings
• Standard Chartered Private Equity
• Sequoia Capital
• Exit
• China