Deutsche Post DHL has sold its Chinese contract logistics business to emerging domestic logistics player SF Holding, for an initial €700m.

DP DHL will receive an upfront payment of Rmb5.5bn (€700m) and the two parties have signed a 10-year agreement that will see the German company paid a “revenue-based partnership fee”.

DP DHL Group’s supply chain China business will be incorporated into SF Holding and operate as a co-branded organisation.

It will cover the supply chain business in mainland China, Hong Kong and Macau, and does not include its international express, freight transport and e-commerce logistics solutions in China.

DHL said the company would operate under the leadership of Yin Zou, the current chief executive of Greater China of DHL Supply Chain, with his existing management team.

It added: “This strategic partnership will allow Deutsche Post DHL Group to continue to participate in the fast-growing Chinese supply chain market, leveraging SF Holding’s extensive domestic infrastructure, distribution network and broad base of local customers.

“This will accelerate the expansion of the co-branded organization’s customer base. Deutsche Post DHL Group is committed to enhancing the organization’s product and services offering by providing the breadth of its global supply chain expertise.

Deutsche Post DHL Group chief executive Frank Appel added: “The joint capabilities of Deutsche Post DHL Group and SF Holding will create a unique platform to meet the need for a high quality end-to-end supply chain provider in China.

“SF Holding’s local market expertise in China has real advantages for our customers across industries including technology, healthcare, retail, automotive, and e-commerce. Combined with our global operations standards and network support, the agreement provides a solid foundation to continue exploring further opportunities in China in the coming years.”

Earlier this year, SF Holding subsidiary SF Express ploughed $100m into US digital freight forwarder Flexport, and SF Holding chairman Dick Wong explained that today’s deal was part of the same expansion strategy.

“SF Holding has been actively expanding its business-to-business (B2B) capabilities and pursuing different strategic partnerships to grow SF Holding into a truly integrated logistics solutions provider that delivers best-in-class services for our clients,” he said.

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