The transaction is expected to generate a gain on disposal of approximately $289.5 million.

Singapore Post (SingPost) has announced that it will hold an Extraordinary General Meeting (EGM) on March 13 to seek shareholders’ approval for the proposed divestment of its Australia business, Freight Management Holdings (FMH), to Pacific Equity Partners (PEP).

The transaction represents an enterprise value of A$1.02 billion ($867.0 million). 

FMH, a leading technology-enabled logistics provider, has grown significantly since SingPost’s initial investment in 2014, says SingPost in a Feb 26 bourse filing. Formed through strategic acquisitions and mergers, including CouriersPlease and Border Express, FMH has become among the top five logistics players in Australia by revenue, adds the company. 

“This EGM provides our shareholders with the opportunity to vote on this important transaction, which we believe will unlock substantial value,” says Simon Israel, chairman of the board, SingPost. “The proposed divestment delivers a strong return on our investment in Australia. It crystallises the unrealised value of the business and brings forward unlocking value for shareholders. We encourage all shareholders to review the details of the transaction and participate in the EGM.” 

FMH is held through SingPost Australia Investments (SPAI). From the divestment, the SingPost Group expects to receive gross proceeds of approximately A$775.9 million in cash, which is approximately $274.8 million in excess of the net asset value (NAV) of SPAI as at Sept 30, 2024 

The transaction is expected to generate a gain on disposal of approximately $289.5 million.

The levered return on equity is approximately four times the SingPost Group’s A$93.6 million equity investment in FMH over the last four years. 

The SingPost Group intends to use some of the proceeds to repay borrowings, in particular, its Australian dollar-denominated debt amounting to A$362.1 million as at Sept 30, 2024, undertaken for the financing of the acquisition of FMH. 

The board is also considering the payment of a one-tier tax-exempt special dividend, subject to the completion of the proposed disposal. 

Further announcements on the special dividend will be made “at an appropriate time” when the FY2024 ended March 31 financial statements of the group are released in May. 

Following completion of the proposed disposal, the SingPost Group will consist mainly of two business units, being Singapore and International. 

The remaining business of the SingPost Group will continue to be a postal and eCommerce logistics provider in Asia Pacific. 

“Given the materiality of the sale of the Australian business, the board has stated that the SingPost Group will need to reset its strategy after the completion of the proposed disposal. The board will consider the progressive divestment of the Group’s non-core assets to pay down debt and create a pool of funds to re-invest subject to its strategy reset and/or return to shareholders, while at all times ensuring the Group is appropriately funded,” reads the announcement.

In the interim, the Group will consider investing in completing the transformation of the Singapore Postal and Logistics business into a”sustainable business” by supporting the growth of eCommerce logistics. 

The board is “confident” that the proposed disposal is in the best interests of the company and its shareholders as it enables SingPost to unlock significant value upfront, reinforcing the Group’s liquidity and supporting meaningful deleveraging of debt. 

A circular to shareholders with the relevant information relating to the proposed disposal will be shared on Feb 26. In the event that shareholders do not vote in favour of the proposed disposal, the board will review and reconsider its strategy in relation to its Australian business. 

Background on the divestment

In July 2023, the Board initiated a strategic review of the SingPost Group’s portfolio of businesses, with a view to enhancing shareholder returns and ensuring that the SingPost Group is appropriately valued. Bank of America (BofA) was appointed financial adviser to the Board. 

During the strategic review, SingPost received unsolicited interest in the acquisition of FMH, leading to an international competitive bid process conducted by BofA. 

After evaluating various options, including full and partial divestments, organic and inorganic growth strategies, the board determined that a full divestment was the best option and a first step towards bringing forward and unlocking value for shareholders. 

Shares in SingPost closed flat at 55 cents on Feb 25.