Imperial Holdings Ltd., a South African transport company that today said it began talks to buy a company outside its home market, may be trying to purchase a European logistics business, Avior Research Ltd. said.
Imperial may aim to expand its Imperial Logistics International GmbH unit through acquisitions, said Mark Hodgson, an analyst at Avior Research, in a telephone interview.
Imperial Holdings got about a tenth of its 31.4 billion rand ($4.6 billion) of first-half revenue from Imperial Logistics, which is based in Germany. Imperial Holdings said Feb. 23 it planned acquisitions in South Africa and Europe to expand in logistics.
“An acquisition would give them scale in Europe,” Hodgson said. He rates the stock “buy.”
The Johannesburg-based company “entered into a process relating to an offshore acquisition,” Imperial said in a statement today without giving more details. Imperial Chief Executive Officer Hubert Brody declined to comment further when contacted by mobile phone.
Imperial stock fell after the announcement, declining as much as 1.5 percent to 121.55 rand, before trading 0.9 percent down at 122.28 rand by 2:52 p.m. in Johannesburg.
“Interest rates are low in Europe, the rand is strong,” Avior’s Hodgson said, speaking from Cape Town. “They can afford to make an acquisition,” said Hodgson.
Imperial Holdings reported net income of 1.4 billion rand in the half-year through December. The company had a net debt to equity of 48 percent.
“The current debt level is still low against our target gearing range of 60 percent to 80 percent and leaves room for further expansion of the group,” said the company in an earnings statement on Feb. 23.