(Yicai) April 2 -- JD.Com’s imminent privatization of Dada Nexus, an on-demand delivery platform, signals the Chinese e-commerce giant’s commitment to expanding its instant retail and food delivery business, according to industry insiders.

JD.Com, also known as Jingdong, will acquire 100 percent of Dada’s shares to enhance its instant retail business development, Zhuang Shuai, founder of Bailian Consulting, told Yicai after the companies agreed to take Dada off the Nasdaq.

Dada is a key player in China’s rapidly growing instant retail scene, competing with Meituan and Alibaba’s Ele.me. Dada operates two platforms that enable deliveries in as little as 30 minutes. Consumers can use Dada Now to order groceries, takeout, or products like electronics from stores, while JD Now offers core retail products from JD.Com.

JD.Com announced today that Dada's board has approved its privatization offer, which values the logistics company at USD520 million. The offer price is USD2 per American depositary share, representing a 6 percent premium over the closing price on March 26, a day before Dada said it had received the offer.

The transaction is expected to close in the third quarter, and after the deal, Dada will become a wholly-owned subsidiary of JD Sunflower Investment, with its ADSs being canceled.

Beijing-based JD.Com has been increasing its stake in Dada in recent years. When Dada was listed on the Nasdaq in June 2020, JD.Com was already its largest shareholder, holding 47.4 percent of the equity. In February 2021, the tech giant increased its stake to 51 percent, spending USD800 million, and in 2022, it raised its holding to 52 percent with an additional USD546 million investment. Last September, Jingdong purchased more shares from Walmart, boosting its stake to 63.2 percent.

Optimizing Delivery

The tech giant is ramping up its delivery capabilities to capitalize on the growing instant retail trend.

China’s instant e-commerce market reached CNY2 trillion (USD275 billion) in 2023, a 36 percent increase from 2022, and it is expected to exceed CNY5 trillion by 2027, according to a report from the Chinese Academy of International Trade and Economic Cooperation, a think tank linked to the commerce ministry. 

As part of its strategy to integrate retail with faster delivery, JD.Com announced on March 12 that its premium supermarket chain JD 7Fresh will add 20 new warehouses and stores in northern China’s Tianjin by June to enable deliveries in as little as 30 minutes. Some products will be at least 10 percent cheaper than on other platforms, the company added. Last November, JD 7Fresh integrated its physical stores with warehouses.

This push for quicker delivery is also strengthening JD.Com’s new takeaway business, which was launched in February. A key draw for delivery drivers at JD Takeaway is that the platform offers full-time contracts, with the first batch of drivers hired in February. Many of them are former Dada couriers, Yicai learned. On March 24, JD Takeaway announced that it had surpassed one million daily orders.

JD.Com also revealed today that it will upgrade Dada employees’ salary system. Starting next year, each Dada employee will receive an annual salary equal to 20 months of pay, up from 19 months this year.

In 2023, Dada reported CNY9.7 billion (USD1.3 billion) in revenue, down 8 percent year-over-year. Income from the express delivery segment surged 45 percent to CNY5.8 billion, accounting for 60 percent of the total, driven by strong demand for intra-city delivery services from chain merchants.

Dada's stock price [NASDAQ: DADA] closed up 3.2 percent at USD1.91 in New York yesterday, with a market capitalization of USD496 million.

JD.Com [HKG: 9618] rose 0.4 percent to HKD161.90 (USD21) in Hong Kong today.

Editor: Emmi Laine