TVS Logistics set to acquire smaller rival Gati for Rs1,500 cr
30 July 2018
TVS Logistics Services Ltd, the logistics arm of the $7-billion TVS Group and one of the top supply chain management companies in India, is in talks with smaller rival Gati to buy a controlling stake for about Rs1,500 crore.
TVS is reported to be looking to buy the entire promoter holding of around 23 per cent in Gati, besides buying out some of investors such as Goldman Sachs, pointing to a boost to logistics investments from the uniform GST rates that has spurred commercial activity.
Once the buy-out exceeds the 25-per cent trigger set by market regulator Securities and Exchange Board of India (Sebi), TVS may follow up with an open offer for Gati’s minority shareholders.
Hyderabad-based Gati has also received investments from Kintetsu World Express, a major Japanese freight-forwarding company, which has a 4-per cent stake in Gati. It is not sure if the Japanese firm will also sell its stake in Gati.
A report in The Economic Times quoting sources close to the development said the talks are in an advanced stage and an agreement is likely in a few weeks’ time.
TVS, in which Canada’s CDPQ owns a significant minority stake, is negotiating to buy the entire promoter holding of around 23%.
Founded in 1989 by Mahendra Agarwal, Gati is India’s pioneer in express distribution and supply chain solutions provider with a strong presence in Asia Pacific region and SAARC countries, along with an extensive network across India providing timely deliveries to 19,000 pincodes, covering 672 out of 676 districts in India.
It started providing same-day courier and distribution services and courier management solutions between Chennai and Madurai and later expanded to Hyderabad, Bengaluru, and Hosur.
Gati has an integrated, IT-backed multi modal network of air, road and rail and warehousing facilities across India.
Goldman Sachs acquired its stake following a prolonged legal tussle connected with an FCCB repayment. In December 2011, the company had re-issued FCCBs to Goldman Sachs for $22 million, essentially, to redeem the outstanding FCCBs that were originally issued in 2006.
Japan’s Kintetsu invested Rs270 crore in Gati in 2012 and both the firms have a joint venture for cold storage supply chain solutions while private equity firm Mandala Capital, backed by the University of Texas Investment Management Company has invested Rs120 crore in Gati.
In October 2016, Canada’s CDPQ invested $200 million to buy a significant minority stake in the company.
Founded in 1911 in Madurai, TV Sundram Iyengar & Sons (TVS) is one of India’s oldest business conglomerates and transport firms. The company entered the logistics business in 2004. With offices in 12 other nations, including the US, UK, Germany, Singapore, Thailand, China, Spain, Australia, New Zealand, Mexico, Italy and France, the company currently serves customers in 50 countries.
TVS Logistics, which employs more than 15,000 people, reported a turnover of more than Rs5,600 crore in 2016.