DADA.US
JD.com offers to privatize Dada Nexus

The e-commerce giant has gradually boosted its stake in Dada since the intra-city delivery company’s 2020 IPO, and currently holds 63% of Dada’s shares

  

By Doug Young

E-commerce giant JD.com Inc. (JD.US; 9618.HK) has offered to privatize Dada Nexus Ltd. (DADA.US), completing its gradual takeover of the intra-city delivery company. Dada Nexus said on Monday it received the preliminary non-binding proposal that would see JD.com buy all of the company’s outstanding American depositary shares (ADS) for $2 each.

Dada Nexus said the offer price represents a 42% premium to the stock’s latest closing price the day before the offer. Dada shares rose 28% in Monday trade. But at their closing price of $1.80, the shares are still 10% below the offer price.

Dada Nexus is one of China’s leading local delivery companies, and was formed in 2014 through the merger of JD.com’s intra-city delivery service and independent intra-city delivery company Dada. The legacy JD.com intra-city delivery service, now known as JD Now, accounted for nearly 40% of Dada Nexus’ 2.43 billion yuan in revenue in last year’s third quarter. The legacy Dada service, called Dada Now, accounted for the remainder.

JD.com was a minority stakeholder in Dada Nexus following the company’s formation and has gradually increased its stake since then to a majority. Most recently, JD.com bought 9.3% of Dada’s stock from U.S. retail giant Walmart (WMT.US) last September, raising its stake in Dada to 63.2%.

The $2 purchase price would value Dada Nexus at about $500 million. That means JD.com would need to pay about $185 million for the remaining 37% stake it doesn’t already own. JD.com said it would finance the purchase using its existing resources.

Dada Nexus went public in June 2020, raising $320 million by selling 20 million ADSs for $16 each. The stock briefly jumped as high as $58 in late 2020 but has moved downward ever since amid growing competition and cooling sentiment towards U.S.-listed Chinese stocks. Its $1.41 closing price last Friday was down more than 90% from its IPO price.

The company faces competition from companies like SF Intra-city (9699.HK), a unit of logistics giant SF Holding (6936.HK; 002352.SZ), as well as independent operators like BingEx (FLX.US), which raised $66 million in a U.S. IPO last October. BingEx shares have also performed poorly since the listing, losing about half of their value.

Reflecting the industry’s stiff competition, Dada Nexus reported its revenue fell 7.3% in last year’s third quarter to 2.43 billion yuan ($335 million) from 2.62 billion yuan a year earlier. Its JD Now service, which mostly provides local delivery services for JD.com, performed especially poorly, with its revenue down 40% year-on-year to 930 million yuan. Revenue rose 38.6% for the Dada Now service, which provides delivery services for local merchants like grocery stores.

Dada Nexus has lost money every year since its IPO, including a 197 million yuan loss in last year’s third quarter. JD.com didn’t say what it plans to do with Dada Nexus after the privatization. But it has previously listed some of its other major units in Hong Kong, including JD Logistics (2618.HK) and JD Health (6618.HK).

By Doug Young

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