Mailpac Group Limited is set to acquire the assets and operations of MyCart Quick Limited in an all-share transaction that will see a combined business delivering more than 1.5 million packages across several e-commerce brands.

The deal, which was announced Tuesday, will see Mailpac Group issuing shares to the founders of MyCart Quick Limited Kamar Palmer and Aldane Smith as consideration for the transaction. This transaction will be subject to Mailpac Group hosting an extraordinary general meeting (EGM) with its shareholders, where it will also be proposed to rebrand the company to MyPac Group. MyCart Quick Limited trades under the name MyCart Express.

“After my first meeting with Aldane and Kamar, I knew they would be excellent partners in this journey of building the region’s leader in e-commerce solutions. Their innate ability to read the market, innovate solutions, and execute is a perfect match to our proven capacity to deliver operational excellence in growing companies. The result of this combination of minds and resources will be revolutionary for consumers and shareholders,” said Khary Robinson, executive chairman of Mailpac Group, in the press release.

MyCart was founded in October 2019 by Palmer and Smith, with Palmer currently serving as managing director. The business is described as a value-focused courier which operates a shipping business for both personal and business customers. MyCart currently has nine locations in eight parishes that are supported by tens of thousands of customers. It was also described as the fastest-growing and second-largest courier company in Jamaica with an expansive warehouse presence in Miami according to the press release.

“Our model at MyCart is unique, from customer acquisition to speed of delivery and everything in between. This led to five years of explosive growth, which was great, but also requires established support and resources to avoid certain pitfalls. We believe that Norbrook will give us the right balance of growth support and risk management. With MyPac, we can now continue growing aggressively through continued innovations for consumers but benefiting from the governance and resources of being a publicly listed platform run by proven business leaders,” said Aldane Smith.

Once approval is received from Mailpac shareholders at the EGM, the deal would be closed in 30 days. However, Robinson noted that the EGM should occur 12 months from now and that no shares would be issued until then. He also emphasised, “Under no circumstance will the share capital surpass $500 million despite the scale and size of MyCart as we have developed two alternatives to consummating the transaction and meeting our obligations to the sellers without breaching the share capital rules that allow us to enjoy the tax benefits of the Junior Market.”

Mailpac Group was formed in September 2019 to acquire the related companies Mailpac Services Limited and Mailpac Local Limited. It listed on the Junior Market of the Jamaica Stock Exchange (JSE) in December 2019 where it raised $250 million. Under the current Junior Market rules and the tax remissions set out in law, Mailpac Group’s issued share capital cannot pass $500 million or in other words, the value of its issued shares on its financial statements cannot surpass $500 million. Mailpac’s current issued share capital is $267.36 million which means they cannot raise or issue more than $232.64 million in new equity.

Upon the consummation of the deal, MyPac would be the core entity that would operate Mailpac, Pack Yuh Barrel, Mailpac Local and MyCart. The management of each brand will remain intact and will be overseen by a management committee composed of Robinson, Garth Pearce, Mark Gonzalves, Samantha Ray, Palmer, and Smith. Mailpac currently has 11 locations in a market where there are over 120 competitors.

While the press release didn’t delve into the specific financials of the combined entity, it was noted that the transaction was expected to deliver significant enhancements to revenue and profitability. This is against the backdrop that package volume would nearly double for the combined entity.

For the first nine months of 2023, Mailpac Group’s revenue was down one per cent to $1.20 billion with net profit down six per cent to $203.19 million. Mailpac’s fourth quarter financials were not published up to press time. However, the company’s performance peaked in 2020 when it recorded $1.73 billion in revenue and $443.08 million in net profit.

When asked about the expected impact of the duty-free limit moving to US$100, Robinson responded, “Like everyone in and out of the industry, [we] expect a significant uptick in volumes for the industry after April as the de minimis [duty-free limit] increase has a direct impact on the final price of goods acquired online.”

Mailpac’s total assets up to September were $602 million with $137.50 million in cash. Total liabilities and shareholder’s equity were $96.22 million and $505.78 million, respectively. The company hosted its annual general meeting on October 27.

Mailpac’s share price trended up to $2.18 on Tuesday which leaves the stock marginally down in 2024 with a market capitalisation of $5.45 billion. The stock traded at a 52-week high of $2.50 on January 26. Mailpac’s largest shareholder as of September was Norbrook Equity Partners Limited with a 72.60 per cent stake with the overall top 10 shareholders owning 86.06 per cent of the company.

Mailpac considered a dividend at its Monday board meeting. The company paid $0.11 in dividends in 2023 totalling $275 million. Mailpac also noted that it should have a new independent appointed individual to its audit committee by the end of this month. Robinson also noted that Norbrook Equity was seeking to bring two other businesses under its portfolio to the public equity markets in 2024.

“The transaction marks a pivotal moment in the logistics sector, with MyPac poised to lead the way in delivering exceptional courier services across Jamaica and the Caribbean. The combined expertise, resources, and innovative approaches of Mailpac and MyCart create a formidable force that will shape the future of logistics in the region,” Robinson added.