Paradigm Logistics has offered the Egyptian Transport and Commercial Service (ETRS) a partnership/integration opportunity in the transportation and logistics company, Ostool Transportation Company.
Paradigm Logistics owns a controlling stake in the Ostool Transportation Company, which is considered a leading company in ground transportation, freight and unloading, storage, and logistics management and trade in Egypt.
A source has exclusively told Daily News Egypt that the value of the transaction is expected to be about EGP 1bn.
ETRS will acquire 100% of Paradigm’s share in Ostool through an issuance of new shares in favour of Paradigm, at a fair value determined by a financial advisor.
Pharos Research sees that Paradigm Logistics values ETRS at an average Fair Value of EGP 14.7/share, translating into a market value of EGP 460m. ETRS has a current market cap of EGP 395m.
This valuation is at a premium of around 32% to the weighted average six months prices, and implies a valuation gap of 16.4% to the current market cap.
Meanwhile, Paradigm Logistics values Ostool at EGP 395-640m, which is 1.1-1.4x the value of ETRS.
According to Pharos Research estimates, and based on the mentioned/proposed valuations, if ETRS were to acquire Ostool, it should issue between 27-43 million new shares, representing an ownership of 46-58%. This comes alongside a blended valuation at the range of EGP 855-1,100m, resulting in a post transaction FV of EGP 14.70.
Pharos Research added that, based on the proposed valuations, the transaction has 2 possible scenarios.
The first would see a lower valuation end of Ostool with ETRS, which would result in 27 million new shares issued to Paradigm Logistics. This implies a total number of 58 million post-acquisition shares, with Paradigm to gain a 46% ownership in ETRS. This scenario would result in a blended valuation of EGP 855m, and translates to a FV per ETRS share of EGP 14.70.
The second scenario would see the upper valuation end of Ostool with ETRS, which would result in a new number of shares issued equivalent to 43 million shares to Paradigm Logistics Ltd.
This would imply a total number of 75 million shares post-acquisition and Paradigm gaining 58% ownership in ETRS. This scenario is likely to result in a blended valuation of EGP 1,100m and translates into FV per ETRS share of EGP 14.70.
The FV reached across both scenarios of EGP 14.70/share shows that the transaction will not have a dilution effect on the current shareholder. However, the benefit of this transaction lies within expansion of business locally and regionally, which will provide better market exposer.