A major acquisition deal struck in 2015 by Singapore’s national post and logistics company SingPost has turned sour, dealing a blow to its ecommerce ambitions.
SingPost’s share price plummeted yesterday after the firm published recent performance data (PDF). While revenue rose 17.1 percent in the year up to March 2017, net profit fell 86.6 percent.
An analyst with UOB told The Straits Times he believes SingPost could need until 2018 or 2019 to recover.
The firm was badly hit by a S$185.0 million impairment charge for TradeGlobal – the US ecommerce firm it bought in 2015 for US$168.6 million.
Impairment charges are write-offs, when a company reassesses the value of an acquisition.
“The principal issue is that TradeGlobal has significantly underperformed the business case which supported the investment,” SingPost writes. “Instead of a projected profit of S$9.4 million for FY16/17, TradeGlobal incurred a significant loss of S$25.8 million.”
CEO left soon after deal
SingPost has been in a bit of upheaval for a while. Several of the company’s top executives resigned over the course of a year, including CEO Wolfgang Baier, who led the company at the time of TradeGlobal’s acquisition.
Baier resigned in December 2015, soon after the deal was closed.
SignPost acquired firms like TradeGlobal as part of efforts to transform itself into a global ecommerce player, as its traditional line of business – postal services like snail mail – became less relevant.
SingPost started these changes over a decade ago and is actually on a good way. It has subsidiaries like ecommerce service provider SP Ecommerce, which works with global retailers like Adidas, Philips, and Toshiba, and other ecommerce tech providers like US-based Jagged Peak, to name a few.
It’s also got expert support: ecommerce giant Alibaba owns a significant stake in the company after multiple investments.
But the pace of change might have led to rushed decisions.
A few months after the TradeGlobal deal, Singapore’s Securities Investors Association (SIAS) assembled the board of SingPost for questioning. SIAS is a nonprofit organization advocating for investor rights in Singapore.
According to the public notes from that meeting, SIAS questioned if enough due diligence was done ahead of the acquisition, which was apparently completed in under a month.
SingPost, in its recent announcement, says the board formed an independent committee to review the circumstance of the TradeGlobal acquisition. It will seek legal action if necessary.
A new group CEO, Paul Coutts, is supposed to take charge in June.
SingPost hasn’t responded to our requests for comment.
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