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Highlights
- Silk Logistics has entered into a binding agreement to acquire Fremantle Freight & Storage Pty Ltd, a port logistics specialist based in Perth
- The acquisition cost includes AU$23.6 million payable upfront and an additional AU$7.8 million payable contingent
- The acquisition will add direct volume to Silk Logistics’ footprint in Western Australia and will have a positive effect on the earnings of the Silk Group
Silk Logistics Holdings Limited (ASX:SLH) takes a step forward in expanding its customer service offering. The integrated logistics company has signed a binding agreement to acquire Fremantle Freight & Storage Pty Ltd, a port logistics specialist based in Perth. The acquisition of Fremantle Freight is through the acquisition of head company Brightflow Enterprises Pty Ltd (together ‘FFS’).
Significance of the acquisition
Image source: © Kamachi209 | Megapixl.com
FFS has been operating since 2000, offering different types of port-related services such as warehousing, quarantine, etc.. The acquisition will benefit Silk Logistics as:
- It will add a direct volume to Silk Logistics’s footprint in Western Australia, consistent with its approach of increasing the potential to offer dependable Port Logistics solutions nationally.
- It is anticipated to open demand from Silk’s existing blue chip customer base and other possible cross-selling chances.
- Further, FFS generates more than AU$29 million of revenue in a year, along with robust positive earnings and operating cash flow. It is likely to have a positive effect on the earnings of Silk Group.
Financial details
Funding for the acquisition, which is supposed to complete before 1 September 2022, will be done through cash reserves and debt facilities (subject to approval).
The price of the acquisition includes AU$23.6 million payable upfront and an additional AU$7.8 million payable contingent on attaining agreed financial achievements for the period ending 31 July 2023.
Silk Logistics can also pay 50% of the AU$7.8 million and 100% of any additional consideration in cash or SLH shares, based on its 30-day volume-weighted average price (VWAP) before 31 July 2023.
Commenting on the acquisition, Silk’s CEO Brendan Boyd said, “FFS is an attractive opportunity, the businesses operating philosophy is highly aligned with Silk’s offering and will deliver operational efficiencies as well as further revenue growth.”
He also added that Silk Logistics would get an outstanding FFS team responsible for their success and will continue offering substantial value for FFS and the larger Silk business.
Stock information
SLH has a market capitalisation of AU$167.07 million. At the time of writing this article (22 JUL 10:50 AM AEST), shares of the company were trading at AU$2.060.
