Leading third party logistic company
CH Robinson Worldwide Inc.
(
CHRW
) 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
number.
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.
(
EXPD
). 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
Report
EXPEDITORS INTL (EXPD): Free Stock Analysis
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