Integrated logistics solutions provider Allcargo Logistics Ltd Thursday said it has bought a controlling stake in Gati Ltd for around ₹416 crore, entering the express logistics space.
Allcargo provides a comprehensive range of services, such as multimodal transport operations, container freight station operations, or 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 small and medium enterprises (SMEs). It has a presence across 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 10.3 million shares at ₹75 apiece. Allcargo will also subscribe to a preferential issue of 13.3 million equity shares of Gati at ₹75 apiece. Consequent to the closure of the two agreements, Allcargo will own a 19.43% stake in Gati. Allcargo will spend ₹178 crore for acquiring the stake.
On Thursday, Gati’s shares closed at ₹66 apiece, up 1.15% on BSE, while shares of Allcargo were down 0.37% at ₹94. Upon acquiring these shares, Allcargo will be classified as a promoter of Gati, along with the existing promoters, and will have the right to nominate directors on the board.
Additionally, Allcargo will look to acquire another 26% stake from Gati’s public shareholders through an open offer, which too will be priced at ₹75. If it manages to acquire the entire 26%, Allcargo will end up spending another ₹238 crore, taking its total acquisition spend to ₹416 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," said Shashi Kiran Shetty, chairman, Allcargo.
Gati operates an asset-light, hub and spoke model, with a network of trucking companies providing vehicles as per need.
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.
Allcargo is also entering into a strategic relationship with Kintetsu World Express (KWE), an air freight forwarder, it said. This partnership will allow Allcargo and KWE to jointly explore and pursue further collaborations within and outside India.