India’s Allcargo buys out 3rd-largest US logistics firm Econocaribe
28 Sep 2013
Mumbai-based Allcargo Logistics Ltd has bought US-based logistics company Econocaribe Consolidators through its European subsidiary Ecu Line for about $50 million, the company said on Friday.
The buyout is expected to give Allcargo access to the world's largest economy and many big clients.
This is the seventh overall acquisition for Allcargo Logistics. The company said that it is withholding details of the deal as it is planning another acquisition in the near future, though of a smaller size. The future acquisition will be of a company with its operations in Europe and Australia.
Allcargo said that the Econocaribe acquisition will strengthen and increase its presence in the US market.
''With this acquisition, we expect to add a lot more customers in and out of the US, where we were not present earlier,'' said executive chairman Shashi Kiran Shetty.
Econocaribe Consolidators is the third largest Non-Vessel Operating Common Carrier (NVOCC) in the US, with nine offices in the country and 22 receiving terminals in the US and Canada. An NVOCC does not own a vessel but acts as a carrier by buying space on ships.
''Econocaribe is a zero-debt company and grew at 15 per cent last year,'' Shetty said.
All the employees of Econocaribe will be absorbed by Belgium-based Ecu Line.
The deal will be funded by loans raised in Belgium (at an interest rate of 3 per cent) and from internal accruals of Ecu Line, the company said.
It said that the acquisition will start adding to the earnings immediately.
The deal, Allcargo's seventh acquisition in the last eight years, is expected to immediately add to its earnings.
"When we don't have a presence in the US, many customers don't want to work with us. There are many global customers who want one company to serve all their requirements," said Shetty.
With this buyout, Allcargo, a part of the Avvashya Group, can now tap the US business of big logistics companies like DHL and UPS, the company said.
Allcargo already serves these companies elsewhere in the world. It expects that with the addition of new clients, volume in and out of the US will grow, aiding overall profitability. The acquisition also gives Allcargo a share of the growing trade within the Americas.