Allcargo arm buys 65% stake in Nordicon for $29 million

P Manoj Mumbai | Updated on July 30, 2021

Company now has about 40% market share in LCL consolidation in the Scandinavian region

Allcargo Belgium NV, the wholly owned global subsidiary of Allcargo Logistics Ltd, has acquired 65 per cent stake for $29 million in a new joint venture company formed to take over the business of the Nordicon Group, which runs less than container load (LCL) and rail consolidation in the Nordic region.

The Nordicon Group operates two entities one each in Sweden and Denmark which have been put together in a single joint venture holding company.

Nordicon handles about 300,000 CBM ocean LCL and 50,000 CBM rail every year. In calendar year 2020, it earned about $50 million.

The new JV company ‘ECU Worldwide Nordicon’ has acquired 100 per cent of the Nordicon business for $44 million in which Allcargo Belgium has invested $29 million for 65 per cent stake while the balance is held by the current promoters of Nordicon. Allcargo funded the acquisition through internal resources.

Allcargo Belgium operates under the brand/network name ECU Worldwide.

Strong presence

Ravi Jakhar, Chief Strategy Officer, Allcargo Logistics, said Allcargo had aspired for a strong presence in the Scandinavian region as part of a vision to expand the business of ECU Worldwide.

“We have not been very successful historically in building the business through our agents there and our market share was fairly small,” Jakhar said.

“With this acquisition, we would now have a near 40 per cent market share in LCL consolidation in the Scandinavian region across Sweden, Norway, Finland and Denmark. It makes us a formidable No1 player by acquiring this very strong, well-recognised and fast-growing company in an important geographic region,” he told BusinessLine.

Nordicon has built a rail freight consolidation business which works exactly like ocean freight consolidation that is completely asset light.

“Just as containers are carried on ships, they get carried on trains from China to Europe. This is a business they do in the Nordic region and now we can expand this product across Europe through the ECU Worldwide network. This becomes a second new product offering which gets added to the ECU Worldwide network and explains the strategic importance of the JV,” he said.

Jakhar said that the Nordicon businesses are not part of the ECU Worldwide network currently. “This means that all the cargo they are handling as they switch into the ECU Worldwide network will start flowing through the ECU offices. This implies that all the containers they import will also now get handled at the origin at the ECU offices and similarly all the container they export would also get handled at the ECU offices at the destination,” he said.

The “double impact” of the business they are doing, leads to earnings for them but the entire business would also flow into the ECU network, creating synergies, incremental revenues and profits for ECU Worldwide as a whole,” Jakhar added.

Over a period of five years, there are options available to Allcargo to consider buying the balance stake in the JV.

Jakhar said there is “no active work happening” on an overseas listing of the wholly owned subsidiary of Allcargo.

Published on July 30, 2021

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