OYAL Mail is harnessing the worldwide boom in online shopping with its £210 million acquisition of one of Canada’s largest trucking firms.
The distribution group’s overseas freight arm GLS International is picking up family-owned freight group Rosenau Transport to expand operations in North America’s $25 billion parcel market, growing at 5% annually.
The Rosenau network will combine with existing GLS routes on the US west coast, expanding its cross-border capacity.
Royal Mail believes the deal, funded through a mix of cash and debt, will drive earnings growth this year and accelerate its growth ambitions for the international arm, which is its most profitable division.
It outlines a plan to double the profits from the GLS to €500 million from 2020 to 2025.
The success would strengthen the case for its demerger from its UK origins, which is weighed down by its handling of letters and large pension liabilities.
Shares of the company rose 0.8% to 416.9p in early trade. The stock is up 23 per cent this year.
GLS Chief Executive Martin Seidenberg said: “Adding Rosenau Transport as a complement to GLS further enhances our accelerating strategy.
“With its strong presence in Western Canada, high quality, entrepreneurial culture, as well as freight handling capabilities and parcel capability, Rosenau Transport’s model is similar to our existing Canadian business and provides an excellent fit.”
Rick Barnes, president of GLS Canada, said: “As we tie the two regional carrier networks together, with direct service to most cities and towns in the country, we will produce one of the most integrated transportation systems in Canada.”
Rosenau Transport posted revenue of C$175 million and underlying earnings of C$41.6 million in the 12 months to September. It has 24 proprietary facilities in four Canadian provinces.
Royal Mail expects the deal to close on December 1 subject to regulatory approval.
AJ Bell’s Russ Mold said: “While the UK branch has benefited from COVID and the volume of parcels being shipped has increased due to the e-commerce boom, costs are likely to see upward pressure in the near term Because the company has launched it. Seasonal recruitment drives, with business impacted by economy-wide staff shortages.”