Allcargo Logistics Ltd., an integrated logistics solutions provider, on Thursday announced that its is foraying into the express logistics space by acquiring a controlling stake in Gati Ltd for up to Rs416 crore, the company said in a statement.
Allcargo currently provides a comprehensive range of services such as multimodal transport operations, container freight station operations / inland container depot operations, projects and engineering solutions, warehousing, distribution, contract logistics and logistics parks.
Gati has a wide-ranging customer base across corporate India, e-commerce companies as well as SMEs. It has a presence in 727 districts and a service network that reaches out to 19,000 PIN codes across the country.
As part of the transaction, Allcargo has signed a share purchase agreement with Gati’s promoter group to acquire up to 1.03 crore shares at a price of Rs75/- per equity share. Allcargo will also subscribe to a preferential issue of 1.33 crore equity Shares of Gati at a price of Rs75 apiece. Consequent to the closure of these two agreements, Allcargo will own a 19.43% stake in Gati Ltd.
Allcargo will spend Rs178 crore for acquiring the above shares.
On Thursday, shares of Gati closed at Rs66 per share, up 1.15% on the BSE, while shares of Allcargo were down 0.37% at Rs94.
Upon acquiring these shares, Allcargo will be classified as a promoter of Gati along with the existing promoters and it will have a right to nominate directors on the board.
Additionally, Allcargo will also look to acquire another up to 26% stake from Gati’s public shareholders through an open offer, which too will be priced at Rs75. If it is successful to acquire the entire 26% through the open offer, Allcargo will end up spending another Rs238 crore, taking its total acquisition spend to Rs416 crore.
The deal is expected to close by 30 March 2020.
“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 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,” stated Mr. Shashi Kiran Shetty, Chairman, Allcargo Logistics Ltd.
Gati operates an asset-light model with a distribution network of trucking companies that provide vehicles on need basis. The business operates on a hub and spoke model across the country.
Allcargo will fund the deal through a mix of debt and monetization of non core assets.
“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,” said Bala Aghoramurthy, Deputy Managing Director, Gati Ltd.
Allcargo is also entering into a strategic relationship with Kintetsu World Express (KWE), an air freight forwarder, the company said. This partnership will allow Allcargo and KWE to jointly explore and pursue further collaborations within and outside India.