In an all-cash deal, Allcargo will first buy just over 10 per cent of the promoters’ stake before making an open offer for an additional 26 per cent. That will be followed up by a preferential allotment for another 10 per cent, said a person in the know. Allcargo intends to keep Gati listed as a separate entity.
Gati’s promoters, headed by Mahendra Agarwal, owned 17.78 per cent in the company as of September end, latest available data from the Bombay Stock Exchange showed. But not all the promoter shareholders, including Agarwal’s wife Neera Agarwal, may sell initially, said the person cited above.
An entity called Neera and Children Trust owns 5.16 per cent in the company, while Agarwal’s son Dhruv’s benefit trust owns 0.25 per cent. Goldman Sachs and Bay Capital together own 11.87 per cent in the company as public shareholders. They too will likely get an exit during the open offer.
The deal, discussions which have been on for more than a year, will give Allcargo an entry into express logistics and distribution as well as the ecommerce segment. Gati has a presence across 20,000 pincodes in the country.
The Indian express industry is expected to grow at a compounded annual growth rate of 17 per cent and reach Rs 48,000 crore by 2023, a Deloitte study last year estimated.
Allcargo had been in advanced talks for the transactions in August last year, but withdrew subsequently. ET reported the first round of talks on August 15, 2018. Talks were renewed earlier this year. The final agreement between the parties was held up by Kintetsu World Express, a Japanese freight forwarder that owned 3.99 per cent stake in Gati as of September end.
Gati had been in talks with TVS Logistics last year to sell a controlling stake in its joint venture with Kintetsu called Gati-Kintetsu Express for Rs 1,500-2,000 crore, but the deal didn’t happen. Gati owns 70 per cent in the JV, while its Japanese partner Kintetsu World Express owns the rest, according to Gati’s latest annual report. The JV contributes 69 per cent to the total revenue of the company.
Gati was established in 1989 and now has 540 operating units, 135,954 delivery locations, 1,717 routes and runs a fleet of over 5,000 vehicles. It handles 5.6 million packages every month.
Allcargo gets 88 per cent of its revenue from its multimodal transport operations, primarily from its European arm ECU Worldwide. The rest comes from container freight stations, project and engineering solutions and supply chain management. It is building logistics parks in four cities across the country. ECU on November 20, announced the acquisition of a majority stake in Hong Kong-based PAK DA (HK) Logistics and Singapore-based Spechem Supply Chain Management (Asia).
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