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Feb.19 (NBD) -- Chinese logistics giant SF Holding Co Ltd (SF Holding) announced the conclusion of the deal with international logistics giant Deutsche Post DHL (DHL) on Tuesday in a statement to the Shenzhen Stock Exchange.

The Chinese company signed an agreement to buy 100 percent stake in DHL's supply chain and logistics operations covering mainland China, Hong Kong and Macau for 5.5 billion yuan (813.1 million U.S. dollars) in cash through a fully-controlled subsidiary last October.

And Equal Wind Limited, a subsidiary of SF Holding designated by the DHL party, has completed supplementary provisions on the transaction.

The deal also includes a 10-year revenue-sharing agreement under which DHL will license its name and provide training and customer referrals to the co-branded business SF DHL Supply Chain China. Former chief executive of DHL Supply China, Zou Yin, will head the new business.

Some people think this is a good deal for DHL. It is noticed that its supply chain business is the only one that reported slowing earnings before interest and taxes (EBIT) in 2017 and EBIT margin slowed down to less than 4 percent that year. It can regain a considerable amount of cash by selling the business.

In addition, the deal with SF Holding is the cornerstone for DHL to gain unprecedented access to China's immense domestic market, DHL Chief Executive Frank Appel previously said.

The tie-up with DHL is also important for SF Holding's deployment in comprehensive logistics. Its chairman Wang Wei once noted that the company aims not only at the traditional delivery market, but also the logistics business in a broader sense which is valued at around 12 trillion yuan (1.8 trillion U.S. dollars).

Yang Daqin, a researcher of China Society of Logistics, told NBD in an interview that the deal will help SF Holding to continue to lead the industry in China and build a tighter logistics network in Asia. Moreover, people who know the running of international supply chain are valuable human resources. In addition, a majority of DHL's customers are corporate customers and deal may bring SF Holding some high-end customers.

It is noticed that SF Holding is anxious to diversify its businesses as the growth of the delivery industry slows down.

State Post Bureau of China predicted that China's express delivery sector will have handled 49 billion parcels, an increase of 22 percent. The growth rate is down from than 2017's 28 percent and 2016's whopping 51.4 percent.

In April 2018, SF Holding subsidiary SF Express ploughed 100 million U.S. dollars into U.S. digital freight forwarder Flexport to expand its service abroad. In May, SF Express sub-brand SX Freight was open for partners for franchised stores and planned to establish a less-than-truck-load express service network in two years.

Later in August, SF Holding joined forces with U.S.-based HAVI Group to establish a new cold chain logistics joint venture in China.

At the same time, the ground for logistics, a weakness in the SF's supply chain, keeps growing in recent years. It is noticed that the area increased from 4,226 mu (696.2 acres) in the end of 2017 to 4,603 mu by the first half of 2018. In addition, it has logistics industrial parks in 37 cities across the country.

The new deal with DHL is expected to further consolidate SF Holding's position in the field.

Email: tanyuhan@nbd.com.cn