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Mon, October 19, 2020-9: 29 am
UPDATED Mon, Oct 19, 2020 – 10:55 am
POSTAL Singapore Post (SingPost) service provider is seeking to purchase a 38% stake in Freight Management Holdings (FMH), a fourth-party logistics services company (4PL) incorporated in Victoria, Australia for AU $ 85 million ( S $ 84.1 million) in cash.
SingPost Logistics Holdings, a wholly owned subsidiary of SingPost, entered into a conditional purchase and sale agreement with existing FMH shareholders on October 16, as well as a share subscription agreement with FMH to purchase the stake, SingPost said in a stock presentation on Monday morning before the open market. There is also a call option for SingPost to buy additional FMH shares that could give it a majority stake in the company.
Upon completion of the acquisition, SingPost Logistics intends to establish a new holding company in Australia to maintain its equity interest in FMH.
SingPost’s core businesses and existing core activities include the operation and supply of mail and parcels, ownership, as well as e-commerce logistics.
SingPost said the acquisition is in line with the group’s strategy to “transform into a leading provider of e-commerce logistics solutions, focusing on opportunities in the rapidly growing Asia-Pacific region.”
He added that Australia is one of the largest and most developed e-commerce markets in the region by gross value of merchandise and that the overall Australian market for courier, express and parcel (CEP) is estimated to be worth about $ 10 billion. Australians today. “Covid-19 has accelerated the adoption of e-commerce and is driving retailers to adopt online sales channels more quickly. Volumes continue to grow and the CEP market is expected to benefit from these trends,” said SingPost.
In addition to generating immediate profits, the agreement will allow the group to further expand its business-to-business-to-consumer logistics capabilities in Australia, capitalize on Australia’s growing e-commerce segment and acquire a complementary 4PL technology platform. and distribution management solution, SingPost added.
It also noted that there will be “no significant changes in the risk profile” of the group as a result of the acquisition.
FMH’s core business is the provision of integrated supply chains and distribution solutions to customers in Australia through a 4PL technology platform. FMH offers these services under the trade name “EFM” to more than 500 companies in Australia.
FMH is a technology-driven “watchtower” company with few assets, SingPost said. “Using its technology, analytics and network, FMH is able to match customers’ freight profile to the optimal carrier, increasing efficiency, utilization and profitability for both customer and carrier,” said SingPost.
Damian Degenhardt, an Australian resident, founded FMH in 2000 and is its majority shareholder and managing director. Upon completion of the acquisition, Degenhardt will continue in his current role, SingPost said. FMH has a “long standing business relationship” with SingPost Group, having been a customer of CouriersPlease, a wholly owned subsidiary of SingPost for many years, the group noted.
Based on FMH’s unaudited consolidated financial statements for the financial year ended June 30, 2020, the profit before tax of FMH and its subsidiaries for fiscal year 2020 was approximately A $ 20.3 million. At the end of June, FMH’s net asset value was around A $ 26 million, while its net tangible assets stood at about A $ 13.3 million.
The latest FMH valuation as of July 31 this year by PricewaterhouseCoopers Securities, Australia, values the company between A $ 182 million and A $ 217 million, or a midpoint valuation of A $ 198 million.
The total consideration of A $ 85 million will be paid in two tranches and will be financed from the group’s internal cash resources and external loans, SingPost said.
The first tranche, estimated at A $ 58.8 million in cash, will consist of A $ 28.8 million for the acquisition of common shares of existing shareholders and A $ 30 million as payment for the subscription of new FMH shares that will be will issue, so SingPost would have a combined 28 percent interest in the expanded issued share capital of FMH.
Completion of the first tranche is subject to the fulfillment of certain conditions, including obtaining regulatory assents such as approvals from the Australian Foreign Investment Review Board, SingPost said.
Meanwhile, the second tranche is expected to take place approximately 12 months after the completion of the first tranche. The second tranche, or approximately A $ 26.2 million of the consideration, will be for the purchase of FMH shares from certain FMH shareholders who represent 10 percent of the expanded capital stock of the company.
Under the terms of the agreement, certain FMH shareholders have also granted SingPost a purchase option to acquire additional FMH shares representing about 13 percent of FMH’s expanded share capital. SingPost may exercise the purchase option at its discretion at any time during a one-year period, starting from the date of the second anniversary of the completion of the first tranche payment, SingPost noted.
If the purchase option is exercised, SingPost would have a 51 percent interest in the expanded capital stock of FMH after purchasing the option shares. If this occurs, SingPost will have 90 days from the completion of the option share purchase to negotiate with the remaining FMH shareholders the terms of a proposed acquisition by SingPost for all remaining FMH shares it does not yet own.
If there is no mutual agreement after this negotiation, SingPost, the remaining FMH shareholders, and FMH would work together to prepare for an initial public offering (IPO) of FMH, SingPost said. In the event that there is no FMH IPO within one year from the end of the trading period, SingPost will acquire the balance of the FMH stake in three tranches over a three-year period, the group added.
SingPost shares were trading to 68.5 Singapore cents at 10:34 AM M. Monday, up to a penny or 1.5 percent.
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