Singapore-based legal counsel WongPartnership has published a critical report on Singapore Post’s acquisition of US-based e-commerce logistics provider TradeGlobal Holdings (TG).
SingPost acquired 96.3% of the e-commerce provider for fashion, beauty, cosmetic and lifestyle products in October 2015 for US$168.5 million from private equity firm Bregal Sagemount, but when
the Singapore postal provider posted its full year results in April 2016, net profit had dropped a massive 87% from the previous FY’s S$249 million to S$33 million, mainly due to the booking in
its fiscal fourth quarter of a S$185 million impairment charge coming from the TG subsidiary.
Following the unexpected impairment charge, SingPost formed an independent committee in May, to conduct a review of the circumstances surrounding SingPost’s consideration and approval of the acquisition. The committee subsequently sought legal counsel to assist in reviewing the TG acquisition and it engaged FTI Consulting, an independent global business advisory firm, to assess the adequacy of the financial and commercial due diligence performed in relation to the transaction.
Asymmetrical flow of information
The summary report by WongPartnership, which provides initial observations in advance of a full report, notes that the due diligence in TG’s acquisition was not fully documented and it also points out that the valuation for TG was significantly higher than the price Bregal Sagemount paid for the company back in 2013.
The report also highlights an "asymmetrical flow of information" in the entire project, where certain information was not raised (or raised with little detail or explanation) to the board prior to or at the time of passing of the October 14, 2015 directors' resolution to approve the TG acquisition.
New M&A unit established
The report also notes that the "significant underperformance in the years immediately prior to the TG Acquisition, in view of the Aggressive Forecast Risk, warranted greater skepticism to the achievability of the forecasts, and a more conservative valuation of TG may have been arrived at following an examination in greater detail of previous and current forecasts.”
In conclusion, the report notes that SingPost has meanwhile established a new Merger & Acquisition (M&A) policy which specifically describes the policies and processes on acquisitions and divestments to serve as a guide for all transactions conducted by SingPost's M&A team.
Nol van Fenema