Allcargo Logistics Ltd has ventured into the express logistics space by acquiring a controlling stake in Gati Ltd for Rs 416 crores, the company said after the board approved the deal.
As part of the deal, Allcargo will buy up to 1,03,85,332 equity shares at ₹75 per share from some of the existing members of the Promoter and Promoter Group of Gati – Mahendra Kumar Agarwal, Mahendra Investment Advisors Pvt Ltd and TCI Finance Ltd (TCI), and Gati.
This includes 9,67,000 equity shares of Gati, which pursuant to the order of the High Court at Kolkata are to be restored to TCI and which would form a part of the Share Purchase Agreement (SPA), if restored prior to the completion date of SPA.
Allcargo will also subscribe to a preferential issue of 1,33,33,340 equity shares of Gati at ₹75 per share, subject to the approval of the shareholders of Gati.
If the open offer is fully subscribed, Allcargo will end up with a 44.6% stake in Gati.
Further, Allcargo will make an open offer to buy 3, 17,42,615 equity shares representing 26 per cent of the paid up voting equity share capital (post preferential issue and vesting of stock option) from the retail share-holders of Gati at ₹75 per share, in accordance with the requirement of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011.
Allcargo provides a range of services like Multimodal Transport Operations (MTO), Container Freight Station Operations/Inland Container Depot Operations (CFS-ICD) and Logistics parks. Allcargo’s market leadership in the global less than container load (LCL) consolidation business and Gati’s domestic express transportation segment allows the company to offer end-to-end transportation capabilities to customers.
Shashi Kiran Shetty, Chairman, Allcargo Logistics Ltd said: “The exponential rise in cross-border and domestic e-commerce has opened up new markets for traditional express players such as Gati. With Allcargo’s 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.”
Bala Aghoramurthy, Deputy Managing Director, Gati Ltd: “With this strategic deal with Allcargo Logistics, we have entered a new era of consolidation in the domestic express logistics space. This collaboration also reiterates our commitment to ensure maximum outreach across untapped markets and provide benchmarked last-mile delivery solutions to our clients.”
With this acquisition, Allcargo is also entering into a strategic relationship with Japanese freight forwarder Kintetsu World Express (KWE), a key customer of ECU Worldwide (Allcargo’s wholly-owned global subsidiary) in its LCL business. This partnership will allow Allcargo and KWE to jointly explore and pursue further collaborations within and outside India.
Kintetsu owns 3.99 per cent stake in Gati.
The acquisition seeks to align Allcargo with the growing Indian transportation and logistics market which is expected to further consolidate owing to the digital push and continued reforms pursued by the government.
Gati has been scouting for a strategic partner who could provide management and operational synergies and launch Gati into its next phase of growth.
Mahendra Agarwal, Founder & CEO of Gati, said: “This alliance strengthens Gati with more management bandwidth, operational synergies, cross-selling opportunities and financial strength. Further, the alliance between Gati and Allcargo will help consolidate Gati’s position in the domestic logistics sector by adding capabilities that cover the entire range of logistics functions for its customers and increase Gati’s revenue potential manifold”.
Kintetsu World Express (KWE) part of Japan’s Kintetsu Group Holdings, which entered into a joint venture with Gati to form the Gati-KWE subsidiary in 2012, continues to remain invested, and will retain its existing association with Gati, Agarwal added.