WiseTech buys Sydney company SmartFreight for $55 million

By Yolanda Redrup OCT 17 2018 / Financial Review

Logistics software company WiseTech Global has made its third local acquisition in the last year, buying Sydney-based transportation marketplace SmartFreight for up to $55 million.

The acquisition is the 24th for the company since July 2017, as the business aims to create “mini WiseTechs” across the globe.

SmartFreight helps businesses optimise their logistics for parcel or pallet (less than a truckload) deliveries, providing a marketplace of 650 transport providers in Australia, New Zealand, Ireland, Britain and South Africa, along with data on things such as the best routes, carriers, prices and lowest carbon footprint. It has 3300 customers around the world, including Mazda, Hyundai, Epson and Pandora Jewellery.

WiseTech chief executive Richard White told The Australian Financial Review the deal was for SmartFreight’s technology, rather than geographic expansion, as the company builds up its capability in first and last mile logistics.

“It’s a strategic asset designed to increase our footprint in the first and last mile. We’re strong in the middle, which is international logistics, and also at the border, but the first and last mile is where you deliver from the warehouse to the customer, or from the warehouse to international,” he said.Advertisement

“Logistics is a very fragmented industry where many components don’t connect and there’s thousands of islands of data that don’t integrate… [but] CargoWise One is a truly integrated global platform and all the acquisitions are part of us building something that’s bigger and better.”

The acquisition comes with a $20 million upfront price tag, with a further multi-year earn-out potential of $35 million, contingent on business and product integration, customer transition and 2020 revenue performance.

‘Opportunity to improve’

The deal is likely to accelerate the expansion of WiseTech’s ecommerce offering within its flagship CargoWise One product, version two of which is being beta tested by some of its major clients at the moment.

WiseTech is also expecting to integrate SmartFreight with its other products such as parcel shipping transport management solution Pierbridge, which it acquired in June, and Australian transport and logistics software vendor TransLogix, which it bought prior to listing.

As part of the deal, SmartFreight managing director Ken Aitken will stay on with the business.

“Joining the WiseTech Global group allows us to plug our 21 years of experience in first and last mile delivery into their leading integrated global platform, which is being continually enhanced and expanded. This is a great opportunity for us to improve and scale up our shipping solutions and grow in key markets,” he said.

‘I’d never want to short a high-growth tech stock’

In the last year, WiseTech has also acquired local businesses CMS Transport Systems and warehouse management systems business Microlistics. The fast-growing company prides itself on still having all the founders of its acquired businesses involved in WiseTech.

On Wednesday, WiseTech was trading up almost 4 per cent at $18.18, but this is still 27.3 per cent below its August peak of $25, when it leaped 28 per cent in a day on the back of its full-year results.

On Monday it was one of the few major tech stocks to not be caught up in the momentary technology rout, which saw companies such as Afterpay, Domain and REA Group record substantial one-day losses of more than 4 per cent.

Over the last two days these losses have largely been reversed (with the exception of Domain) and Mr White said tech stocks would be the investment of “the next quarter century”.

“Technology will change the world and it will do it considerably over the next few decades. No other industry has so much upside,” he said.

WiseTech has forecast 42 to 47 per cent revenue growth to $315 million to $325 million for the 2019 financial year and earnings before interest, tax, depreciation and amortisation of $100 million to $105 million, up 28 to 35 per cent.

Despite being considered one of the most expensive software companies in the world, WiseTech has a low percentage of short traders on its register at only 1.98 per cent, according to ShortMan. In contrast, when Oracle made its $1.6 billion bid for Aconex last year, almost 10 per cent of its register were short traders.

“I’d never want to short a high-growth tech stock, it’s a dangerous business,” Mr White said. “Ultimately when you understand that we’re growing the company for the very long-term and at high-growth rates, it’s very hard to short the stock.”

https://www.afr.com/technology/wisetech-buys-sydney-company-smartfreight-for-55-million-20181017-h16qlj?fbclid=IwAR2RsLJO7xdaH1VCC5x9_HccebL50cmgM1_mvIqfsM8p_9_QqiuKs1rsSmE


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