JD.com’s logistics business raises $2.5B from Hillhouse, Sequoia China and others

JD.com, the Chinese e-commerce giant that is Alibaba’s closest rival, is raising giving its logistics business a huge boost after it announced that the unit is raising $2.5 billion.

JD Logistics, which became a standalone business last April, is raising the investment capital from a range of backers who include Hillhouse Capital, Sequoia China, China Merchants Group, Tencent, China Life, China Development Bank Capital FOF, China Structural Reform Fund and ICBC International, according to a press release announced today.

JD.com confirmed it will remain the majority shareholder with a stake of 81.4 percent. The transaction, which is JD Logistics’ first outside funding event, gives the division a valuation of around $13.5 billion.

It may sound unconventional to give independence to a division, but it is fairly common among China’s top tech firms. JD.com itself span out its financial services arm and that business raised just over $1 billion last year. Indeed, Sequoia China participated in funding for both JD.com spin-outs. (Note: Unlike the financial services division, JD Logistics remains part of the JD.com parent.)

Alibaba itself operates a range of affiliates, including $60 billion valued Ant Financial — which it is in process of acquiring one-third of — and a logistics unit called Cainaio.

Cainiao was formed by a consortium of existing logistics players to give the project a running start with resources and customer bases. Alibaba itself took a 48 percent stake, and Cainaio later raised undisclosed funding at a reported valuation of $7.7 billion.

JD.com operates seven fulfillment centers and 405 warehouses in China. It has long prioritized logistics, more so than perhaps even Alibaba.

The company’s network includes fresh produce which requires an efficient network for transportation and management. Elsewhere, it has tested drone delivery and it plans to invest more heavily in logistics automation, including automated warehouses and drone deliveries.

That’s set to continue after this infusion of capital, JD.com CEO and Chairman Richard Liu explained.

“Our decision early on to build out our own logistics network has paved the way for JD Logistics to become the industry leader it is today. The shift throughout global e-commerce towards our model is vindication of the path we chose. This current funding round sets the stage for us to further invest in expanding our lead in the sector in areas like automation, drones and robotics,” he said in a statement.

There may also be synergies in Southeast Asia, where JD.com has made a range of investments including deals in Thailand, Indonesia and Vietnam.

Note: Article updated to correct that JD Logistics was not spun out of JD.com.