Allcargo Logistics Ltd has agreed to acquire a controlling stake in express logistics company Gati Ltd for as much as Rs 416 crore ($58.4 million), the two companies said on Thursday.
Allcargo has inked pacts to acquire a 19.43% stake in Gati from its promoters and through a preferential issue for a total of almost Rs 177.9 crore. It has also made an open offer to Gati's public shareholders to buy another 26% for up to Rs 238.07 crore, the companies said in separate statements.
In all, Allcargo will shell out about Rs 416 crore for a 44-45% stake assuming full participation by public shareholders in the open offer.
“The exponential rise in cross-border and domestic e-commerce has opened up new markets for traditional express players such as Gati,” Allcargo chairman Shashi Kiran Shetty said in a statement.
“With Allcargo’s existing strength in the ocean transportation business and Gati’s expertise in land and air transportation, we are now in a unique position to offer our customers a suite of truly multimodal solutions,” he added.
As per the deal, Gati's promoters will sell an 8.51% stake to Allcargo. Gati will also issue preference shares equivalent to a 10.92% stake to Allcargo. The share sales will happen at Rs 75 apiece. Shares of Gati ended at Rs 66 apiece on the BSE on Thursday.
The deal will value Gati upwards of Rs 910 crore. This is roughly 27% premium to its current market capitalisation of Rs 717 crore.
Allcargo, which will take management control of Gati, said that it is not in the express logistics industry currently and that this acquisition will help it enter this segment and become an integrated logistics services provider.
Allcargo also said that Gati has a pan-India network in surface express, which it expects to grow at a fast pace in the next few years thanks to the nationwide implementation of the Goods and Service Tax.
Allcargo, which counts private equity firm Acacia Partners as its key public investor, will fund this transaction through a mix of internal accruals and debt. The company will monetise certain non-core assets, including a land parcel and part of a logistics park.
The Gati deal is Allcargo’s first acquisition in nearly three years. Allcargo had announced to buy an additional 49% stake in South Asia Terminals Pvt. Ltd from Hind Terminals in 2017. After the transaction, South Asia Terminal became a wholly owned subsidiary of Allcargo.
This transaction followed another deal, where Allcargo announced the acquisition of a controlling stake in CCI Integrated Logistics Pvt Ltd for an undisclosed amount.
Shares of Allcargo closed at Rs 94.15 apiece on the BSE on Thursday, down 0.21% from the previous close.
Founded in 1993, Mumbai-based Allcargo operates container freight stations and inland container depots and provides multimodal transport solutions. Its services include ocean, air and land logistics, multi-city consolidation, container freight logistics, warehousing, project cargo movement and cargo consolidation.
