Eastern Bell, Hidden Hill join $512m China air cargo deal

Eight investors will take a combined 45% interest in China Southern Airlines Logistics (CSA Logistics), according to a filing. The airline will retain 55%. A total of RMB818 million will be put to work immediately – taking the unit’s registered capital to RMB1.82 billion – with the rest held in reserve.

Eastern Bell, Hidden Hill, and China Reform Holdings are the three largest external investors, each of which is contributing RMB745.5 million for a 10% stake. Smaller participants include Legend Capital, two entities managed by China International Capital Corporation (CICC), and Chinese logistics operator Sinotrans.

The capital will go towards increasing air cargo capacity, building additional ground logistics infrastructure, and establishing better connectivity between air and ground transportation. The investment is intended to give CSA Logistics a more diversified ownership structure and improved corporate governance, supporting its transition into a modern, integrated logistics service provider.

The filing mentions mixed-ownership reform, a process whereby private capital and best practices are brought into state-owned enterprises with a view to improving efficiency, but the government does not cede control. Since 2013, China has completed more than 4,000 cases of reform involving RMB1.5 trillion in non-state capital, the central State-owned Assets Supervision & Administration Commission (SASAC) said in October.

The commission also indicated that further reforms would feature prominently in China’s 14th Five-Year Plan, a broad policy document that covers 2021-2025. Caixin reported earlier this month that the government would establish a RMB70.7 billion fund to facilitate mixed-ownership reform.

CSA Logistics provides cargo services to 243 destinations in 44 countries and regions through 3,000 flights a day operated by China Southern. The company also has 14 large freighters that run 60 flights a week and cooperates with 23 trucking businesses to deliver road transfer services on 1,043 routes. In 2019, revenue and net profit came to RMB8.5 billion and RMB368 million, respectively.

“This private equity investment is in line with our strategy of building an efficient logistics ecosystem. We see significant opportunities to create value in the ongoing reformation of China's state-owned enterprises and look forward to strongly supporting China Southern Logistics as they transform into a modern logistics integrated service provider,” Higashi Michihiro, chief strategy officer of GLP China and chairman and managing partner of Hidden Hill, said in a statement.

Hidden Hill manages RMB8.4 billion in committed and invested capital, focusing on investing in companies that develop logistics technologies, support logistics operations, or digitize the supply chain. Since its establishment in 2018, the firm has participated in mixed-ownership reform deals across aviation, shipping, and railways.

Eastern Bell is also a logistics and supply chain specialist, concentrating on three themes: end-consumer, enterprise services, and data technology. One of its co-founders, Zhiming Mei, was previously CEO of GLP China. Last year, the firm closed its first US dollar-denominated fund at $365 million. Total assets under management exceed $1.9 billion.

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• Topics
• Greater China
• Support services
• Expansion
• China
• Logistics
• Hidden Hill Capital
• Eastern Bell Venture Capital
• Legend Capital
• CICC