Chinese courier ZTO Express delivers this year’s biggest US IPO

Chinese package delivery company ZTO Express raised $1.4bn in the biggest US initial public offering of the year on Wednesday as its backers cashed in on China’s booming online-shopping industry, a source familiar with the deal said.The stock market debut, the biggest by a Chinese company since the $25bn IPO of e-commerce giant Alibaba Group Holding Ltd in 2014, gave the Shanghai-based company a market value of more than $12bn.ZTO’s US listing is a head start over rivals in the world’s largest express delivery market because it gives the company faster access to cash to expand.The company wants to use $720mn of its IPO proceeds to buy more trucks, land, facilities and equipment.Its Chinese competitors SF Express, YTO Express, STO Express and Yunda Express have all unveiled plans for listings in Shenzhen and Shanghai but with a backlog of about 800 companies waiting for approval to go public in China and frequent changes to the rules, a New York listing is regarded as a quicker and more reliable way of raising funds and tapping a broader mix of investors.ZTO’s existing shareholders, including private equity firms Warburg Pincus, Hillhouse Capital and venture capital firm Sequoia Capital will also get much more leeway and flexibility to exit their investment under US market rules.In China, they would be locked in for one to three years after the IPO.ZTO priced 72.1mn shares at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share.That price is about 27 times its expected 2017 earnings per share, according to people familiar with the company’s financials.By comparison, rivals SF Express, YTO Express, STO Express and Yunda shares trade between 43 and 106 times earnings, according to Haitong Securities estimates.US rivals, United Parcel Service Inc and FedEx Corp, which are growing at a much slower pace, are trading at multiples of 17.8 and 13.4 times expected 2017 earnings. The source asked not to be named because the pricing is not yet public.ZTO did not immediately respond to a request for comment.As concerns grow about a weakening Chinese currency, the New York IPO also gives the company more stable dollar-denominated shares it can use for international acquisitions, according to people close to the company.ZTO will have a dual-class share structure that will give its founder Lai Meisong 80% voting power in the company, even though he will only hold 28% of the stock after the IPO.Most of Lai’s shares are Class B ordinary shares carrying 10 votes, while Class A shares, including the new US shares, have one vote.China’s markets do not allow shares with different voting power.China’s express delivery firms handled 20.7bn parcels in 2015, shifting 1.5 times the volume moved in the United States, according to consulting firm iResearch data cited in the ZTO prospectus.The market will grow an average 23.7% a year through 2020 and reach 60bn parcels, iResearch forecasts.Domestic rivals STO Express and YTO Express have unveiled plans to go public with reverse takeovers worth $2.5bn and $2.6bn.The country’s biggest player, SF Express, and rival Yunda Express, are working on similar deals worth $6.4bn and $2.7bn respectively. ZTO intends to list on the New York Stock Exchange (NYSE) under the ticker ZTO. Morgan Stanley and Goldman Sachs Group Inc are the lead IPO underwriters.