Valuation concerns spike Adani’s buyout of promoter stake in Snowman Logistics

Billionaire Gautam Adani’s acquisition of cold chain logistics company Snowman Logistics Ltd has hit a hurdle after the latter’s promoters on Monday said the agreement to sell a 40.25% promoter stake to Adani is no longer valid.

Gateway Distriparks Ltd, which runs various logistics businesses, is the promoter of Snowman Logistics.Adani Logistics Ltd in December had struck a deal to acquire the 40.25% promoter stake in Snowman Logistics Ltd, along with an open offer to acquire another 26% from public shareholders. Adani was to shell out 296 crore to acquire the promoter share and another 191 crore for the public shareholding.However, the two parties could not close the transaction by the agreed timeline of 31 March.”This is to inform you that the condition for completion of transaction by 31 March 2020 was not met by the Acquirer despite without prejudiced good faith attempts to resolve the matter, and the Agreement is not in force due to repudiation thereof by the Acquirer. The Acquirer has been so informed,” Gateway told stock exchanges in a filing on Monday.

According to a person aware of the development, the deal between the two parties has got stuck due to the impact of covid-19 pandemic, specifically on the valuation of the business.

“The deal was struck in December and things have rapidly changed post that because of covid-19. The valuation of Snowman stock has depreciated significantly since covid-19 and it will be a challenge for the buyer to go ahead with the transaction, given the drop in valuation,” he said requesting anonymity. “The business disruption caused by covid-19 is also expected to impact Snowman’s financials.”The transaction was agreed at a share price of 44 per share in December. As of Monday, the stock price of Snowman is down almost 35% to 28.0 per share, from the transaction price.

For the nine month period ended 31 December, Snowman reported a loss of 13.8 crore, compared with a profit of 4.29 crore in the same period in the previous financial year.A spokesperson for the Adani Group declined to comment on the development.However, while the promoter stake sale talks seem to have gone off the rails, Adani has already bought a 26% stake in the company as part of the open offer, which closed in MarchSnowman Logistics claims to be the largest company in the cold chain logistics space, with a pan India presence operating 33 temperature-controlled warehouses and 293 refrigerated vehicles.