Deal or No Deal: Adani Group reconsidering Snowman Logistics deal?


Sometime in December, 2019, Adani group forayed into cold chain logistics by purchasing a major stake in Snowman Logistics Ltd,at a time when India was battling with economic slowdown amid domestic companies cutting down on expenditure due to lack of strong revenue visibility. Now, with an unprecedented crisis like the current pandemic, Adani Group is revisiting the decision of continuing with the deal, in the aftermath of the ongoing pandemic.

On Wednesday, Adani Ports and Special Economic Zone Ltd (APSEZ) notified the possibility of either letting go of the deal or re-negotiating the price to buy a 40.25 per cent stake in Snowman Logistics Ltd for INR 296 crore.

The deal was originally announced in December last year following which APSEZ acquired a 26 per cent stake in the cold chain company in March through a mandatory open offer to public

“We are re-evaluating the deal looking at the current situation and we want to re-assess what is the impact on cold storage business because of COVID-19.”

Karan Adani, Chief Executive Officer and director at APSEZ

Mr Adani said that APSEZ was considering blending both the options: cancellation or re-negotiation on the price.

The group had been pondering over and reanalysing the industry situation; wondering if the cold chain business made sense in the current environment. In the event the business seemed feasible, Mr Karan Adani said that they would go ahead at re-negotiating on the price.

However, if the deal did not make sense,it would be certain that APSEZ will not go ahead with it.

It is only by the end of the year, somewhere between Ocober and November that a final call on the deal would be taken by the groups.

“We have acquired a 26 per cent stake from the market as part of open offer and we have kept on hold the stake of 40.25 per cent that we have to buy from the promoters,”, shared Mr Adani.

APSEZ acquired the stake from Snowman Logistics’ parent company Gateway Distriparks at INR 44 per share.

The acquisition took place through APSEZ’s wholly-owned subsidiary Adani Logistics.Snowman Logistics runs integrated cold chain logistics and provides warehousing, distribution and value-added services. It operates 31 temperature-controlled warehouses at 15 locations, with 1.04 lakh pallets warehousing capacity and 293 refrigerated vehicles (reefers).

On December 27,2019, Mr Karan Adani, while announcing the acquisition said that,“The acquisition is in line with our strategy and vision to be a leader in providing integrated logistics services in India and moving from port gate to customer gate. Cold chain is key product in customer gate strategy given India’s consumer-driven demand”.

Adani Logistics, a wholly-owned subsidiary of Adani Ports, purchased a major stake for INR 296 crore in Snowman Logistics Ltd, thus making a formal entry into the world of cold chain logistics.

The company was all set to acquire a 40.25% stake in Snowman Logistics Ltd from Gateway Distriparks Ltd, as per the signing of the agreement.

“The purchase price of INR 44 per share represents a 3.2% premium to the market price of December 27, 2019, and a 12% premium to 60-day average,” the company had earlier said in a statement.

Incorporated in 1994, Snowman is an acclaimed name in the domain of cold chain logistics with over 30 percent of capacity within the integrated network of organised cold chain service providers in India. It provides warehousing, distribution and value-added services.

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