TOM Group–China Post JV Announced

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HONG KONG, Aug. 4 – TOM Group, Hong Kong’s media and communications giant, announced plans for the formation of a massive joint venture with China’s postal service to create the mainland’s largest e-commerce services provider.

The JV, to be named Beijing Ule E-Commerce, will be 51 percent owned by China Post. TOM Group is investing through their Shenzhen-based NewECLink subsidiary and will be the exclusive IT systems provider for the business, providing an additional US$30 million to market the new platform.

“This will be a game-changer in the [domestic e-commerce] industry because it fulfills the nation’s call for secure and reliable online shopping,” TOM Group’s chief executive Ken Yeung Kwok-mung told the South China Morning Post. “Who can compete against China Post and all the resources at its disposal?”

China Post has 46,000 post office locations and a further 36,000 postal bank savings locations. The JV will also inherit 17 aircraft, 50,000 corporate clients, 56,000 postal vehicles and some 150,000 postmen. That infrastructure will be the key to getting products to customers. China Post account holders can already access the service via desktop, mobile phones, customer service hotlines, or over the counter. Operational partners of the JV also include Nike, Adidas, Samsung, Avon, Shisiedo, Giordano and LG.

“TOM has had a tough time of it in recent years, and has been patient with China in developing relationships and strategies. However, this massive deal comes at a very fair investment price and may turn out to be something of a bargain,” comments Chris Devonshire-Ellis, principal of Dezan Shira & Associates. “Joint Ventures have always had a place in the investment arsenal for China, especially for strategic deals, and quite frankly no one else is able to match China Post’s national reach. It’s an exciting development and I expect to see more high profile JVs between China’s SOEs and international businesses in the future. The game is now China nationally, and such investments pave the way.”