SINGAPORE (THE BUSINESS TIMES) - Singapore Post (SingPost) is looking to buy a 38 per cent stake in Freight Management Holdings (FMH), a fourth-party logistics (4PL) service company incorporated in Victoria, Australia for A$85 million (S$84.1 million) in cash.
SingPost's wholly-owned subsidiary SingPost Logistics Holdings entered into a conditional sale and purchase agreement on Oct 16 with existing shareholders of FMH, as well as a share subscription agreement with FMH for the stake purchase, SingPost said in a bourse filing on Monday morning.
On completion of the acquisition, SingPost Logistics intends to set up a new holding company in Australia to hold its equity interest in FMH.
SingPost said the acquisition is in line with the group's strategy to "transform into a leading e-commerce logistics solutions provider, focusing on opportunities in the fast-growing Asia-Pacific region".
Besides being immediately earnings accretive, the deal will allow the group to further scale its business-to-business-to-consumer logistics capabilities in Australia, capitalise on the growing e-commerce segment in Australia, as well as acquire a complementary 4PL technology platform and distribution management solution, SingPost noted.
The principal activity of FMH is the provision of integrated supply chain and distribution solutions to customers in Australia through a 4PL technology platform. FMH provides these services under the tradename of "EFM" to over 500 businesses across Australia.
FMH is an asset-light, technology-driven "control tower" business, SingPost noted. "Utilising its technology, analytics and network, FMH is able to match customers' freight profile with the optimal carrier, increasing efficiency, utilisation and profitability for both customer and carrier," SingPost said.
Damian Degenhardt, an Australian resident, founded FMH in 2000 and is its majority shareholder and managing director. Following the completion of the acquisition, Mr Degenhardt will continue in his existing 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 the unaudited consolidated financial statements of FMH for its financial year ended June 30, 2020, profit before tax of FMH and its subsidiaries for FY2020 was approximately A$20.3 million. As at end-June, net asset value of FMH was about A$26 million, while its net tangible assets stood at about A$13.3 million.
The latest valuation of FMH as at July 31 this year conducted by PricewaterhouseCoopers Securities, Australia, values the firm at 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.
The first tranche, estimated to be A$58.8 million in cash, will consist of A$28.8 million for the acquisition of ordinary shares from existing shareholders and A$30 million as payment for the subscription of new FMH shares to be issued, such that SingPost would have a combined 28 per cent interest in the enlarged issued share capital of FMH.
Completion of the first tranche is subject to the fulfilment of certain conditions, including obtaining regulatory nods such as approvals from the Foreign Investment Review Board of Australia, SingPost said.
Meanwhile, the second tranche is expected to take place on or about 12 months following the completion of the first tranche. The second tranche, or an estimated A$26.2 million of the consideration, will be for the purchase of FMH shares from certain FMH shareholders representing 10 per cent of the firm's enlarged share capital.
SingPost shares were trading at 68.5 cents as at 9.13am on Monday, up one cent or 1.5 per cent.