Paradigm Logistics offered the Egyptian Transport and Trade Service (ETRS) an opportunity to partner / integrate into the transport and logistics company Ostool Transportation Company.
Paradigm Logistics owns a majority stake in Ostool Transportation Company, which is regarded as a leading company in ground transportation, freight and unloading, storage, management and trade of logistics in Egypt.
A source exclusively told Daily News Egypt that the deal is expected to be worth around EGP 1 billion.
ETRS will acquire 100% of Paradigm’s stake in Ostool by issuing new shares in favor of Paradigm at a fair value determined by a financial advisor.
Pharos Research finds that Paradigm Logistics values ETRS at an average fair value of EGP 14.7 / share, resulting in a market value of EGP 460 million. ETRS has a current market capitalization of 395 million EGP.
This valuation is increased by approximately 32% compared to the weighted average prices over six months and implies a valuation difference of 16.4% compared to the current market capitalization.
Meanwhile, Paradigm Logistics rates Ostool at 395-640m EGP, or 1.1-1.4x the value of ETRS.
According to estimates by Pharos Research, and based on the mentioned / proposed valuations, if ETRS were to acquire Ostool, it would have to issue between 27 and 43 million new shares, representing a 46 to 58% stake. This is accompanied by a mixed valuation of around EGP 855-1,100 million, resulting in a post-trade FV of EGP 14.70.
Pharos Research added that, based on the proposed valuations, the transaction has 2 possible scenarios.
The former would see an end of Ostool’s lower valuation with ETRS, resulting in 27 million new shares issued to Paradigm Logistics. This involves a total number of 58 million post-acquisition shares, with Paradigm to acquire a 46% stake in ETRS. This scenario would result in a mixed valuation of EGP 855 million and result in a FV per ETRS share of EGP 14.70.
The second scenario would see the end of Ostool’s top valuation with ETRS, resulting in a new number of issued shares equivalent to 43 million shares at Paradigm Logistics Ltd.
This would imply a total number of 75 million shares after the acquisition and Paradigm acquires 58% stake in ETRS. This scenario will likely result in a mixed valuation of 1,100 million EGP and result in a FV per ETRS share of 14.70 EGP.
The FV reached in both scenarios of EGP 14.70 / share shows that the transaction will not have a dilutive effect on the current shareholder. However, the advantage of this transaction lies in the expansion of activities at local and regional level, which will provide better exposure to the market.