Leading third party logistic company
CH Robinson Worldwide Inc.
) has reached a definitive agreement to sell its payment service
business, T-Check Systems Inc., to Electronic Fund Source LLC
(EFS) for a cash consideration of $302.5 million. It is expected
that the CHRW will utilize the net proceeds to fund its planned
acquisition of Phoenix international.
T-Check, which has been a subsidiary of CHRW since 1984, is a
business-to-business provider of payment processing services and
supports fund transfer, vendor payment, fuel purchasing and
online expense management among others.
T-Check primarily caters to transportation industry. However,
because of a change in industry dynamics, the Minnesota-based
company has expanded into the financial service sector, thereby
handling fund transfer and expense management for other
industries. After the deal, EFS expects to retain most of
T-Checks Minnesota employees but hasn't declared any specific
Management of CHRW has argued that the strategic rationale for
selling the unit is to bring long term success for T-Check. They
believe that as the financial service sector continues to
consolidate, the integration with EFS will provide T-Check with
the scale and size it requires. On a different note the company
hasn't performed very well in the preceding three quarters
registering a topline growth of only 3.125% which could be one of
the key factors responsible for the sell.
Recently, CHRW announced that it plans to buy privately-held
global freight forwarding company Phoenix International Inc. in a
cash and equities deal worth $635 million. This was required to
thwart stiff competition from a large number of entities
competing in the international logistics industry like
Expeditors International of Washington Inc.
). We believe, CHRW will use the fund to buyout Phoenix
International Inc, which will give it a strong foothold in the
freight forwarding industry.
We maintain our long-term Neutral recommendation on C.H.
Robinson Worldwide Inc. The company also retains a Zacks #3 Rank,
implying a short-term Hold rating.
CH ROBINSON WWD (CHRW): Free Stock Analysis
EXPEDITORS INTL (EXPD): Free Stock Analysis
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