Looking for a patch of ground in a rising market, bpost picks up a declining asset as it prints its first tech deal with the $820m purchase of Radial, eBay’s former commerce services unit. The acquirer, which operates the Belgian mail service and other logistics businesses, is aiming to capitalize on the growth of e-commerce in North America. Yet its projections ignore the extent of its vulnerability to an increasingly dominant Amazon.
Radial formed with the 2016 combination of retail fulfillment services firm Innotrac and the former eBay Enterprise business, which provided fulfilment, order management and other services. The two were bought out by investor syndicates and combined in 2016 by their shared owner Sterling Partners.
Its fortunes have tracked those of its customers, many of which have filed for bankruptcy since the start of 2016, including Aeropostale, RadioShack, Toys R Us and Sports Authority. Radial’s revenue is projected to decline to about $1bn from roughly $1.25bn last year.
At 8x trailing revenue, Radial fetches the same multiple that eBay Enterprise nabbed in its 2015 sale. That’s a rich multiple considering the earlier acquisition of eBay Enterprise included e-commerce software platform Magento, which has since been spun off and likely had higher margins than the services-heavy Radial.
That multiple may turn out to be less rich than bpost’s projections that the asset can expand its top line by 6-8% annually, considering that it’s coming off a year where it lost 20% of its revenue catering to the second tier of retailers. Not only are those the retailers that are most vulnerable to Amazon’s domination of commerce, the online goliath runs a fulfillment business of its own, making Radial vulnerable on two fronts – those customers that aren’t crushed by Amazon could very well side with it.
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