Dubai Financial Market-listed logistics giant Aramex will have until Friday, 14 March, to either accept or reject ADQ subsidiary Q Logistics Holding’ offer to acquire 100% of the freight services firm, according to the official bid document (pdf). The transaction is expected to be completed in 3Q 2025, while payment of consideration will be made within three days after completion of all the required steps.

REFRESHER- Through its subsidiary Q Logistics Holding, ADQ offered last month to buy all the Aramex shares that aren’t owned by AD Ports, which has a 22.69% stake in the freight services firm. This would be through a cash-consideration of AED 3 per share. The strategic acquisition would value Aramex at AED 4.39 bn, according to our calculations. It’s noteworthy that AD ports is a subsidiary of ADQ.

The pitch: ADQ wants to transform Aramex into a globally competitive company in the freight services industry, but this is expected to be “complex, capital intensive and to take time,” the document reads. This will “consequently limit the perspective of short to medium-term return for shareholders.”

Strong valuation, despite the decline in performance: The offer price of the transaction represents an attractive valuation, as it reflects a strong multiple of 9x EV/EBITDA for the last twelve months ending September 2024, and a multiple of 29x P/E for the same period. These multiples indicate that the company is being valued more favorably in terms of its earnings, and growth potential, suggesting investors are willing to pay more for each USD of earnings, which is not uncommon in strategic acquisitions such as this one.

IN CONTEXT- Aramex's financial results have demonstrated a decline in performance since 2019, and the company also declared that no dividends will be issued for 2023, indicating a lack of returns for its shareholders, according to the official bid document.

2024 on track to be a success: While the company’s full financial results for 2024 are not out yet, its bottom line surged by 49.8% y-o-y to AED 76.9 mn in the first 9M of 2024, and its top line also increased 11.0% during the same period to AED 4.6 bn, driven primarily by improved sales, especially in international and domestic express operations.

ADVISORS- Rothschild is acting as financial adviser for Q Logistics, while Emirates NBD capital is the lead manager for this project. Clifford Chance was hired to provide counsel on the potential acquisition. Meanwhile, Aramex tapped HSBC as its financial advisor for a potential takeover.

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