Allcargo Logistics is in talks to buy a stake in smaller rival Gati, people with knowledge of the matter said, as India’s biggest cargo company attempts to boost its presence across Asia’s third-largest economy.
Allcargo is in discussions to acquire Gati, that’s 6 per cent owned by Goldman Sachs Group, at an equity valuation of about Rs 1,300 crore ($183 million), one of the people said, asking not to be identified as the talks are private. The purchase will trigger a mandatory offer to buy Gati’s outstanding shares, the people said.
India’s logistics and warehousing industry is attracting companies from Blackstone Group to Warburg Pincus as they seek to tap into a sector that Gati forecasts will be worth $217 billion by 2020. That’s buoyed by demand from e-commerce firms such as Amazon.com Inc and Walmart Inc’s India unit to provide last-mile connectivity into cities as well as remote hinterlands across one of the world’s largest landmass.
“For Allcargo, which was primarily into foreign trade business, buying stake in Gati is a clear de-risking initiative as the latter is more focused on domestic business,” Mathew Antony, Managing Partner at Mumbai-based advisory firm, Aditya Consulting. “This acq-uisition will help Allcargo offer total logistics solutions to e-commerce companies.”
The board of Allcargo is likely to consider the proposed acquisition in October, the people said. Gati has managed to secure approval for the sale from its Japanese partner Kintetsu Group in its flagship company, Gati-Kintetsu Express, they said.