SingPost to raise stake in Australian logistics service company

SINGAPORE Post (SingPost) said on Friday (Oct 8) that it will be increasing its stake in Australia logistics service company, Freight Management Holdings (FMH), from 28 per cent to 51 per cent, with revisions to an agreement made last year.

The company had said last year that it would be acquiring 38 per cent of FMH in tranches, and it also had a call option that would have allowed it to subsequently acquire an additional 13 per cent stake in FMH.

SingPost said in the bourse filing on Friday that parts of the agreement have been revised, which would also bring forward dates for it to acquire the shareholding. It has exercised the call option early, and the consideration for the option shares is estimated at A$84.5 million (S$83.7 million).

SingPost has also entered into an agreement granting FMH an option to acquire 100 per cent of SingPost's shareholding in CouriersPlease, a last-mile parcel delivery with nationwide coverage across Australia.

SingPost group chief executive Vincent Phang said that he is confident that FMH will better place the SingPost group to become a key logistics player in Australia.

"Since our first investment in FMH last year, we are pleased with FMH's strong performance," he said. "This further investment is the next step for us as we build Australia as our second home market."

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SingPost had announced last October that it would be taking a 38 per cent stake in FMH in two tranches. The first tranche involved SingPost acquiring existing and new shares in FMH for a consideration of A$58.9 million to bring its stake in the company to 28 per cent. This was completed in December last year.

The second tranche would have involved acquiring an additional 10 per cent of the company from certain shareholders, around a year after the completion of tranche one (in December 2021), for an estimated consideration of A$28.2 million. It has revised the agreement to bring this date forward, subject to regulatory approvals being obtained.

SingPost's call option, which would allow it to acquire an additional 13 per cent stake in FMH, would have been exercisable during a one-year period that began on the second anniversary of the completion of tranche one (December 2022).

SingPost said on Friday that the terms of the call option have been revised, and it may exercise the call option early to acquire the option shares. The consideration payable for the 13 per cent stake, with the early exercise by SingPost is estimated to be A$84.5 million.

This would be funded from SingPost Group's internal cash resources and external borrowings. Acquisition of the option shares would also be subject to several conditions, including approval from SingPost shareholders.

The earnings before interest, tax, depreciation and amortisation (Ebitda) of FMH and its subsidiaries for the financial year ended June 2021, is around A$29.4 million, up from A$26.0 million from a year ago, SingPost said.

"The transaction will be immediately accretive to SingPost earnings upon completion," SingPost said. "The agreement will also further provide SingPost a phased pathway to fully acquire FMH."

Phang noted: "With FMH becoming a subsidiary of SingPost group, we can better derive synergies and build scale to further capitalise on the accelerated growth in e-commerce in Australia."

SingPost shares closed unchanged at S$0.635, before the announcement.