Allcargo Logistics has spent abour USD 50 million in acquiring Econocaribe Consolidators, says founder and executive chairman, Shashi Kiran Shetty.
Speaking to CNBC-TV18, Shetty says the acquisition will be earnings per share (EPS) accretive from the first year of the acquisition.
"The company (Econocaribe) is very healthy and it has got about 350 employees with nine offices in the US and about 22 receiving terminals within America. So, it is among the top three in the US market as global consolidators. It will complete our full circle of operations in most part of the world except for Korea and Taiwan- these are the only two significantly large economies where we are not present," adds Shetty who believes the synergy is a strategic one as it increases the company's presence in the US markets.
Below is the edited transcript of Shetty's interview to CNBC-TV18.
Q: Could you take us through the size of this company and what would be the synergies, how much would it add to your revenues?
A: The company we acquired has been our agent in the US since the last six years. The deal size is upwards of USD 40 million, plus a working capital of about USD 8.5 million. So, it roughly works out to about USD 50 million and the synergy of the acquisition is that we as a group didn't have our own presence in the US, which is one of the largest market in the world.
For us, as a growth strategy and also to have a presence in the largest market in the world adds to a lot of synergic benefit in terms of acquiring new customers, in terms of adding more revenue and bringing over global best practices into the acquired company. We see all these in terms of adding value to the company significantly.
Q: How much have you paid for this acquisition and how have you funded it?
A: The acquisition cost works out to close to about USD 50 million and the funding has happened through our subsidiary Ecu Line and it is funded by the Belgium Bank. About 30 percent of equity contribution from Ecu Line and 70 percent is being funded by the Belgium Bank.
Q: Will you be consolidating the numbers of this company and will this be EPS accretive and from what year?
A: The acquisition is in effect from September 1, 2013 and we will be consolidating it under the Allcargo Logistics consolidated profit and loss (P&L) and balance sheet. So, it is value accretive as of September 1.
Q: So it will be EPS accretive from first year itself?
A: Yes. The company is very healthy and it has got about 350 employees with nine offices in the US and about 22 receiving terminals within America. So, it is among the top three in the US market as global consolidators. It will complete this full circle of our own operations in most part of the world except for Korea and Taiwan- these are the only two significantly large economies where we are not present. Otherwise Ecu Line brand is now operating in almost all important markets in the world with their own operation.
Q: Could you tell us some more about the financials of this company, how much by way of revenues, you said it will be EPS accretive, what will be the margins and the contribution to your consolidated P&L?
A: This company has a revenue of about USD 128 million. I cannot disclose the financial valuation at this stage in terms of the multiples because we are at the moment in discussion with some other company for another smaller acquisition. So, that is why we don't want to talk about the other number but it is about USD 120 million.
This will take our global Non Vessel Owning Common Carrier (NVOCC) revenue to about USD 600 million and with an EBITDA of close to about USD 35 million on a global level.
Q: You also said that 70 percent of the deal will be funded via debt from Belgium Bank from your subsidiary, what will be the consolidated debt on the books of Allcargo post that?
A: It will be roughly about Rs 600 crore because right now, it will be slightly higher about Rs 750 crore but we are already repaying about Rs 150 crore the debt which we have in Indian books.
As a matter of fact, in India we have a debt of about Rs 400 crore. Out of Rs 400 crore we are going to pay about Rs 150 crore and those funds we have already been tied up to repay. So altogether we will have in India about Rs 250 crore and about Rs 450 crore in Ecu Line.
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