Singapore Post will accelerate its deals to boost its stake in Australia’s Freight Management Holdings (FMH) to 51 percent from 28 percent, advancing the Singapore company’s plans to build a second home market in Australia.
The deal, which will make FMH a subsidiary of SingPost, will be immediately accretive to earnings upon completion and will provide a phased pathway to acquiring all of the company, the Singapore postal operator said in a filing to SGX Friday.
SingPost Group CEO Vincent Phang said he was confident the FMH deal would position SingPost to become a key logistics player in Australia.
“Since our first investment in FMH last year, we are pleased with FMH’s strong performance,” Phang said. “The acquisition is consistent with our transformation strategy, enabling us to provide an end-to-end B2B2C logistics solution for customers serving both Business-to-Business (B2B) and Business-to-Consumer (B2C) channels, and provide a seamless logistics service within Australia.”
FMH, a fourth-party logistics service company, provides supply chain and distribution services under the trade name EFM using an asset-light “control tower” model. Using proprietary technology, FMH manages its customers’ supply chain and distribution needs, matching customers’ freight profile with the best carrier to increase efficiency and utilisation.
SingPost had completed the acquisition of its initial 28 percent stake of FMH in December 2020 for A$58.9 million, the filing said.
Revising original deals to speed acquisition
The company is now revising how quickly it acquires the rest of FMH.
“This will enable SingPost Group to better derive synergies and build scale to further capitalise on the accelerated growth in e-commerce in Australia. The performance of FMH in the last 12 months has been ahead of expectation,” SingPost said in the statement.
“This has given SingPost the confidence in taking this next significant step towards the strategic goal of creating a second home market in Australia, via a measured and calculated pathway to full ownership of FMH in time as well as full integration with our Australian assets,” the statement said.
At the time SingPost entered the deal to acquire the initial stake, or tranche, it also entered a deal to acquire a second tranche of around 10 percent of FMH as well as a call option with certain FHM shareholders for another around 13 percent, the filing said.
Under the original deal, the acquisition of the second tranche was to be completed around 12 months after the first for around A$28.2 million, with the option to be exercisable any time after the second anniversary of the first tranche’s acquisition, the filing said.
However, SingPost has now entered a “side letter” to amend the terms to complete the acquisition of the second tranche on the later of 29 October or when relevant regulatory approvals are obtained, the filing said.
In addition, SingPost has entered a call option deed for the early exercise of the call option, with the consideration payable estimated at A$84.5 million, the filing said. For the call option shares acquisition, SingPost will require approval of shareholders at an extraordinary general meeting and the approval of the Foreign Investment Review Board of Australia, the filing said.
SingPost also revised its agreement on negotiating with other FMH shareholders and it will grant options to certain shareholders — the FMH non-management shareholders and the Degenhardt shareholders — which if exercised will require SingPost to buy 50 percent of their shares as of 30 June 2022, with the consideration to be determined based on an agreed multiple of earnings before interest, taxes, depreciation and amortisation (ebitda) for the fiscal year ending 30 June 2022, the filing said.
A second option will also be granted to those shareholders, which if exercised, will require SingPost to acquire the remaining shares as of 30 June 2023, with the consideration based on a multiple of ebitda for the fiscal year ending 30 June 2023, the filing said.
If the first option is exercised by the shareholders, SingPost’s stake in FMH will rise to 74 percent, and if the second option is exercised, it will rise to 98 percent, the filing said.
FMH gets option to acquire CouriersPlease
SingPost has also entered an agreement giving FMH the option to acquire all of SingPost’s shareholding in CouriersPlease, a last-mile parcel delivery service with nationwide coverage across Australia, the filing said.
The option is exercisable at FMH’s discretion any time between 30 September 2022 and 30 September 2023, the filing said. The parties will enter good-faith negotiations if the option is exercised to determine the terms of the sale, the filing said.
FMH has a long-standing business relationship with SingPost, and has been a customer of CouriersPlease for many years, the filing said.
For the fiscal year ended 30 June, FMH’s profit before tax was around A$26.1 million, or around S$25.8 million, up from A$20.3 million in the year-ago period.