French courier group GeoPost is about to become a majority shareholder in Bulgarian express delivery company Speedy with a stake higher than initially planned. GeoPost acquired a 24.8-percent stake in Speedy in 2014 with an option to buy a further 45% by the end of January. However, instead of buying only the 45% in question, GeoPost has launched a buyout bid to all other shareholders in the public company to acquire their shares for the same price of 58.67 levs (30 euro) apiece.
The quoted price values the company at about 315 million levs (161 million euro). The Speedy Group, owned by Valeri Mektupchiyan, is set to receive 142 million levs for the 45% stake in the company and will keep its remaining 20% interest in Speedy, with an option to sell it to GeoPost at a later date.
The acquisition comes amidst the pandemic-fueled growth of courier and delivery services. Speedy claims a 19% share of the Bulgarian market and has ambitions to grow faster.
In 2014, Speedy acquired GeoPost's units in Romania and Bulgaria, while GeoPost agreed to acquire a 25% stake in Speedy, with an option to increase its shareholding interest to 70%. The shift of control in Speedy has long been expected. The only remaining unknown variable was the price.
According to the agreement between GeoPost, which is owned by the French state-owned postal service, and the founder of the Bulgarian company, Valeri Mektupchiyan, the price would depend on Speedy's financial results. The agreed-upon ratio is 8 times EV / EBITDA. The price of 58.67 levs per share also meets the legal requirement for the voluntary tender offer to be priced above the weighted average stock price in the last six months.
A tender offer has not yet been approved by the Financial Supervision Commission and could be amended by the regulator. However, this is not very likely - as it is voluntary, the requirements are simplified. On the other hand, after the acquisition of the majority stake, GeoPost will have to submit a new tender offer. Then, the price cannot be lower, but it can turn out higher, as it will have to be justified with valuation methods like discounted cash flows, comparisons with analogs, net asset value.
The Speedy Group controlled by Mektupchiyan and other managers, will have the option to sell its remaining 20-percent stake in Speedy to GeoPost within eight years starting in 2023. If the group decides not to sell, Geopost will have the option to acquire the stake within one year starting from 2032. The price will be similar to that of the previous agreement - 8 times EBITDA net of consolidated net financial debt for the financial year preceding the date of sale.
A 120 million levs investment plan
According to GeoPost, the tender offer is an opportunity for the company to increase its competitive edge and diversify its portfolio with the fast-growing markets of Bulgaria, Romania, and Greece. Speedy is the second biggest company on the Bulgarian courier services market, holding an almost equal share with the current leader, Econt.
The services of the Speedy were already partially integrated with those of the French company and offered deliveries to foreign countries through its partner network DPD. Now the request is for processes to be further integrated, and for the company's management to be strengthened by representatives of GeoPost. The directors who have been in charge so far will remain with the company.
In 2020, restrictions because of the pandemic and a boom in online shopping led to strong market growth. More than a quarter of revenue comes from international deliveries which are, understandably, dominated by global companies - DHL, TNT, UPS. According to the firm's marketing strategy for Bulgaria and Romania, Speedy will advertise itself as an "economical" international service with a focus on modern and flexible solutions for customers, aiming to increase its market share.
In 2021 and 2022, the company expects a growth rate of 7-8% in sales for domestic deliveries and 10-12% for international deliveries. Speedy is also planning to invest 120 million levs in the next six years. About 40% of this amount will be used for the purchase of new vehicles, including 250 electric vehicles. Another 25% will be invested in expansion of depots and storage hubs, a further 20% for improving shipment processing capacity, and 15% for equipment and software. Automating the main hubs and depots is also a goal set out for 2021-2022.
These projects are expected to be financed mainly by the profits of Speedy, but leasing, bank financing, and support from GeoPost are not excluded. The tender offer is also financed by the French company's resources.