Transportation and Logistics Systems Inc. (TLSS) (OTC: TLSS) announced Monday it entered into an agreement on Tuesday to acquire all of the outstanding shares of SalSon Logistics. The Jupiter, Florida-based e-commerce fulfillment provider said the $90 million purchase price includes $50 million in cash, 19.9% of TLSS stock and $20 million in seller financing.
The stock purchase agreement would net TLSS a 60-year-old third-party logistics company that is expected to “anchor” its growth strategy.
“This would be a game-changing acquisition for TLSS,” said CEO John Mercadante. “Moreover, SalSon’s business provides an amazing platform and extensive infrastructure that would greatly enhance the company’s ability to execute its acquisition and organic growth strategy.”
SalSon is operated out of the Port of Newark with other locations in Florida, Georgia, New York, South Carolina, Texas and Virginia. The 3PL provides warehousing, transloading, dedicated carriage and drayage services. The company has more than 1,200 associates, 1 million square feet of warehousing space and a dedicated fleet of 550 tractors and 1,500 trailers.
The press release said SalSon is currently profitable, generating nearly $100 million in annual revenue.
TLSS began growing its platform of services and adding new markets through acquisition in the first quarter. The company acquired Double D Trucking and Cougar Express, in part to replace business it had with Amazon (NASDAQ: AMZN), which it described as unprofitable.
“SalSon Logistics represents the type of business operation that would provide the infrastructure suitable as a foundation for significant growth through subsequent acquisition opportunities, as well as for organic growth potential,” the press release read. “This acquisition could improve the growth potential of TLSS because, with SalSon as the core foundational operation of the Company, synergistic targets that complement this business could bring immediate value when more acquisitions are secured.”
| Acquisition price | $90M |
| Target revenue run rate | $100M |
| Acquirer revenue run rate | $28M |
| Recent acquisitions by acquirer | Double D, Cougar Express |
| Financing | $60M, $20M in seller financing |
| Closing date | 90 days after execution of SPA |
Financing the deal remains an obstacle
The transaction is contingent on TLSS securing adequate debt financing for the cash portion of the deal, which could be difficult given its prior losses and current negative net worth. Assets of SalSon’s are expected to back the financing program needed to facilitate the deal.
“If the debt financing for the cash portion of the purchase price cannot be obtained, then the transaction will not close,” the release stated. “The Company has just commenced a search for financing by hiring an investment banking firm to assist in the search, which has made inquiries with several financial institutions. As present, the Company has not yet received any proposed terms for financing or entered into an agreement for financing.”
TLSS estimates it will need to raise $60 million in financing, including $6 million in equity financing, to fund the cash portion, pay fees and transaction costs, and provide working capital for SalSon. The amount of the financing represents roughly 2.4 times the market capitalization of TLSS. TLSS would also need to issue shares of common stock to close the deal if it successfully obtains financing.
The deal is expected to close 90 days after the execution of the stock purchase agreement. There is no deposit or breakup or termination fee associated with the transaction if financing is not obtained or other contingencies are not met.
“We are in one of the most exciting and opportunistic times in the logistics space,” said Anthony Berritto, president of SalSon. “So by joining forces with TLSS, a publicly traded company, I strongly believe that together, we can accelerate our mutual goal of growth through strategic acquisition, as well as more readily capitalize upon organic growth opportunities presently available in the industry.”
Berritto is expected to run SalSon and all of TLSS’ existing fulfillment services subsidiaries following the deal. “Berritto has agreed in principle to do so, but if the parties do not reach an agreement on employment terms, the Company does not intend to complete the transaction,” the release read.
