Royal Mail acquires Canadian parcel delivery company

Royal Mail acquires Canadian parcel delivery company

Royal Mail has announced that its subsidiary, General Logistics Systems (GLS), has acquired Canadian parcel delivery company, Dicom Canada, 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 10th largest economy, with Ontario and Quebec representing 57 per cent of the country’s GDP. 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 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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