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US firm buys 65% stake in Jiayu Logistics

By Lu Haoting (China Daily)
Updated: 2008-08-21 09:08

YRC Logistics, a leading US transportation company, yesterday announced it has acquired a 65 percent stake in Shanghai Jiayu Logistics Co Ltd for $44.7 million in a bid to cash in on the country's huge market potential in road transportation.

Jiayu is one of China's largest trucking companies with over 300 trailers and more than 200 subsidiaries across the country.

YRC Logistics will purchase the remaining 35 percent stake of Jiayu in 2010, for up to $39 million, depending on the level of Jiayu's financial performance, the Kansas-based firm said in a press release.

"By virtue of Jiayu's mature network and well-developed operational resources, we can help our customers improve transportation reliability, compliance, data integrity and visibility for their shipments in China," said Bill Zollars, chairman, president and CEO of YRC Worldwide, parent company of YRC Logistics.

"We plan to use Jiayu as the foundation of our growth in China," said Zollars, adding the company will use a dual branding of YRC and Jiayu for some time.

Zollars said the acquisition would allow YRC to connect Jiayu's ground transportation business to its freight forwarding business at JHJ International Transportation, a joint venture between YRC and Shanghai-based Jin Jiang International Holdings Co Ltd. YRC paid $45 million for 50 percent equity in JHJ in 2005.

China's fast and stable economic growth and the ever-expanding expressway network have lured US trucking companies, whose home market is getting saturated. They usually start by acquiring or setting up joint ventures with local Chinese companies to gain local market expertise.

Schneider National, the largest truckload carrier in North America, purchased the key operating assets of Tianjin-based Bao Yun Logistics in 2007. Bao Yun is one of China's top 30 private logistics enterprises.

"The Chinese market is not mature, which is a great opportunity for us over the long term. In the short term, it is even more important because of the US economic slowdown. We need to look for growth segments and a key growth segment for us is our business in China," Zollars said.

China's road transportation industry is fragmented and about 95 percent of ordinary truckload is handled by small companies that operate less than seven trucks, according to the logistics industry association of Jiangsu province.

Figures from the US-China Business Council indicate there are about 2.7 million trucking companies in China, many of which are mom-and-pop set-ups with only one or two trucks.

"There'll be more mergers and acquisitions in the future. And the rising costs of fuel and labor will also force the industry into a massive restructuring and consolidation," said An Jianghong, a logistics analyst with Anbound Group, a consulting firm based in Beijing.