Local logistic analysts are optimistic and support on the latest corporate development of BEST Inc. after the provider of supply-chain services said it received a non-binding buyout proposal from a buyer group that includes its founder and Chinese tech giant Alibaba.
BEST Inc. announced on 6th November that its board of directors has received a preliminary non-binding proposal letter dated November 3, 2023, from Mr. Shao-Ning Johnny Chou, founder, chairman of the Board and chief executive officer of the Company, on behalf of Mr. Shao-Ning Johnny Chou, Mr. George Chow, the chief strategy and investment officer of the Company, Denlux Logistics Technology Invest Inc., Alibaba Investment Limited, BJ Russell Holdings Limited and Cainiao Smart Logistics Investment Limited (the Buyer Group).
The proposal is to acquire all of the outstanding ordinary shares of the Company (the "Ordinary Shares"), including the Class A ordinary shares represented by the American Depositary Shares of the Company (the "ADSs", each representing 20 Class A ordinary shares) that are not already beneficially owned by the Buyer Group for a proposed purchase price of US$0.144 per Ordinary Share or US$2.88 per ADS in cash.
Malaysian logistics analysts believe that this is part of BEST Inc.'s corporate plan, seen as a prelude to its privatization, and it is not expected to impact the Company’s current business operations. On the contrary, analysts widely support BEST Inc.'s privatization plan.
Analysts believe that privatization can provide the Company with greater flexibility to make strategic decisions that are more conducive to its business development, allowing it to better respond to changes in the market environment. Privatization can also provide the Company with more sources of funding, such as through debt financing and equity financing, to support its long-term growth.
"Importantly, this privatization will not disrupt BEST Inc.'s normal business operations. I believe that privatization can also allow BEST Inc. to focus more on its core business. Currently, BEST Inc. is actively developing in the Southeast Asian logistics sector. BEST Inc. can use this opportunity to strengthen supply chain management, expand international markets, and achieve business diversification and internationalization, which is overall advantageous for the entire group's development."
Undervalued Company Market Value
Another analyst believes that the Company’s market value is undervalued, considering BEST Inc.'s cash, cash equivalents, restricted cash, and short-term investments. As of June 30, 2023, BEST Inc. held cash, cash equivalents, restricted cash, and short-term investments of CNY 3.178 billion (approximately USD 438 million), whereas as of June 30, 2022, BEST Inc. held CNY 4.413 billion in cash, cash equivalents, restricted cash, and short-term investments.
"Besides providing flexibility, privatization also provides additional financial support to BEST Inc. for essential areas like research and development, marketing, which would contribute to the further development of the Company.
Enhancing BEST Inc.'s Competitive Edge
The analyst believes that BEST Inc. has been performing well in express delivery, supply chain, and Southeast Asian businesses. With more funds and resources available, BEST Inc. can now fully focus on these core areas and further enhance its competitiveness.
He stated that BEST Inc. has been steadily developing in Southeast Asia since 2019, emphasizing localization. In Southeast Asia, BEST Inc. is establishing a local express delivery network, building overseas warehouses and cross-border logistics, as well as localizing transformations on the technical front, such as teams and logistics systems.
"Through a comprehensive logistics ecosystem that includes supply chain cloud warehouses, cloud distribution networks, express large item networks, international Southeast Asian local logistics networks, and North American overseas warehouses, BEST Inc. connects China, Southeast Asia, and North America into a 'triangle,' building a B2B2C and cross-border business network, offering global supply chain services to customers.
Under BEST Inc.'s focused strategy, the synergy of the three core businesses -– BEST freight, BEST supply chain, and BEST Global - has given BEST Inc.'s business a stronger competitive edge."
This article is provided by BEST Global Logistics Technology (Malaysia) Sdn Bhd
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
