Royal Mail plc acquires Dicom Canada

RNS Number : 5326Z

Royal Mail PLC

03 September 2018

 

3 September 2018

ROYAL MAIL PLC ACQUIRES CANADIAN PARCEL DELIVERY COMPANY, DICOM CANADA

Royal Mail plc (RMG.L) announces that its subsidiary, General Logistics Systems (GLS), has acquired Canadian parcel delivery company, Dicom Canada, (the 'Acquisition') from Wind Point Partners, a Chicago-based private equity firm.

Dicom Canada primarily provides business-to-business parcel services, operating across Canada, with a major focus on the Eastern Canadian provinces of Ontario and Quebec. Canada is the world's 10^th largest economy[1], with Ontario and Quebec representing 57 per cent of the country's GDP[2]. Dicom Canada is well-placed to leverage growth trends in these markets and provides GLS with an established market position in this key economy.

Dicom Canada offers ground-based parcel, freight and logistics services. It operates a network of 28 depots and works with partner carriers across Canada to provide pan-Canadian logistics services. Dicom Canada has experienced good revenue and profit growth in recent years. The Acquisition does not include Dicom's US business.

The total consideration is C$360 million (approximately £213 million[3]) on a debt and cash free basis. The Acquisition will be funded through existing borrowing facilities and is expected to be earnings and cash flow accretive to Royal Mail Group in the financial year ended 31 March 2019. Dicom Canada generated unaudited revenue of C$233 million in the 12 months ended 30 June 2018. The Acquisition is not subject to regulatory approvals.

Dicom Canada will continue to be led by Rick Barnes, President, together with Dicom Canada's existing management team. Dicom Canada will be fully consolidated within GLS for reporting purposes.

GLS provides geographic diversification for Royal Mail Group's earnings and is a growth engine for the Group. It is expanding its presence in European markets and through targeted and focused acquisitions elsewhere. In 2017-18, it accounted for 33 per cent of the Group's adjusted operating profit after transformation costs, up from 29 per cent in the financial year 2016-17.

Rico Back, Chief Executive Officer, Royal Mail Group, said: "This Acquisition is in line with GLS' strategy to grow through targeted and focused acquisitions to capture higher growth segments outside Europe. With its strong presence in Eastern Canada and primary focus on the business-to-business segment, Dicom Canada's business model is similar to GLS' as it provides a high quality delivery service, based on its focus on reliability and excellent customer satisfaction."

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About GLS Group

GLS, General Logistics Systems B.V. (headquartered in Amsterdam), provides reliable, high-quality deferred parcel services for over 270,000 customers, complemented by logistics and express services. Through wholly owned and partner companies, the Group provides a network coverage of 41 European countries and nation states and eight U.S. states and is globally connected via contractual agreements. Over 70 central and regional transhipment points and more than 1,000 depots are at GLS' disposal. With its ground-based network, GLS is one of the leading parcel service providers in Europe. In the financial year 2017-18 GLS achieved revenue of £2.56 billion, and accounted for 33 per cent of Royal Mail plc's adjusted operating profit after transformation costs, up from 29 per cent in the financial year 2016-17.

About Royal Mail plc

Royal Mail plc is the parent company of Royal Mail Group Limited, the leading provider of postal and delivery services in the UK and the UK's designated universal postal service provider. UK Parcels, International & Letters (UKPIL) comprises the company's UK and international parcels and letters delivery businesses operating under the "Royal Mail" and "Parcelforce Worldwide" brands. Through the Royal Mail Core Network, the company delivers a range of parcels and letters products, including the one-price-goes-anywhere Universal Service products. Royal Mail has the capability to deliver to more than 30 million addresses in the UK, six days a week (excluding UK public holidays). Parcelforce Worldwide operates a separate UK network which collects and delivers express parcels. Royal Mail also owns General Logistics Systems (GLS) which covers 41 countries and nation states in Europe and eight states in the Western U.S.. GLS operates one of the largest ground-based, deferred parcel delivery networks in Europe.

About Dicom Canada

Dicom Canada is a transportation and logistics company headquartered in Montreal, Quebec. Dicom Canada operates three business segments: Express, Freight and Logistics. Services provided include overnight and second‐day parcel, freight transportation, freight management and last mile services in the U.S. and Canada. Dicom Canada employs around 1,400 people directly and uses sub-contractors across some parts of the business.

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[1] The World Bank GDP ranking (2017)

[2] Statistics Canada (2017)

[3] GBP:CAD rate of 1:1.69

 

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