AIB Acquisition Corporation (NASDAQ:AIB) has entered into a definitive agreement to combine with Hong Kong-based logistics service provider PSI Group at an enterprise value of $200 million, or 1.5x its 2021 revenue.

PSI Group provides freight forwarding and other logistics services on air and sea between mainland China and international markets with a focus on the US.

The combined company is expected to trade on the Nasdaq once the deal is completed in the first quarter of 2024.

Transaction Overview

AIB has about $11 million in its current trust having seen about 88.6% of shares redeemed in two previous extension votes. Its latest extension granted it the ability to push its deadline all the way to January 21, 2025 without further votes, however.

The parties have not yet released their merger documents or an investor presentation, but AIB’s profile page will be updated once additional information is made available.

Quick Takes: AIB’s trust may have been reduced, but its $11 million is only slightly below the $13 million that PSI Group was hoping to raise in a traditional-way IPO earlier this year.

The company filed its first draft registration in March 2022 and took it through seven amendments, filing its most recent F-1/A in March 2023.

This was a somewhat awkward time for the company to be seeking to launch an IPO as it was still dealing with fallout from COVID-19, which broke a hot streak for PSI Group revenues.

It generated $130.9 million in revenue in 2021 nearly doubling the $71 million it gathered in 2020. It logged $12.6 million in net profit in 2021, albeit for a slender 9.6% margin. Renewed outbreaks and a lag in demand dropped its revenue -15% in the first half of 2022, but it still managed $2.2 million in net profits for a 4.5% margin during this period.

PSI Group more than made up that ground in the first half of 2023, logging +36% revenue growth to $67.1 million during that period, according to the parties’ press release.

The vast majority of the company’s business has been in outbound Chinese exports via air freight forwarding. This made up more than 94% of the company’s revenue in both 2020 and 2021. The small amount of revenue the company derived from imports back into China was primarily made up of ocean transport and its share has declined further from about half a million dollars in 2020 to just $26,1234 in the first half of 2022.

The US accounted for 82.8% of its export revenue with the remaining 17.2% split evenly in 2021 between the UK, France and the Netherlands with 8.6% and 8.6% for all other destinations.

This heavy reliance on US-China trade is noted as a risk in its IPO materials, as it could be disrupted by trade restrictions or geopolitical tensions. The heavy focus on that bilateral trade also makes PSI Group’s business highly seasonal.

Consumer products make up large portion of its cargo and as such it derives an outsized portion of its annual revenue in making fulfillments for holiday-related shopping in the US from October through December.

This is then typically followed by a slowdown in January and February as manufacturers and logistics facilities go on break for the Chinese Lunar New Year.

But, the PSI Group has asserted the primary driver for both its earlier IPO attempts and now the SPAC deal are to diversify its export destinations in the Middle East and Southeast Asia.

A recent flareup in attacks against ocean freighters in the Red Sea would certainly appear to be good press for PSI Groups air freight alternatives. Timing could also be on its side with the way that PSI Group’s business lines up with the de-SPAC closing timeline.

If it manages to be nearing a close with this deal six months from now, that could also be the time that it is releasing figures on its seasonal jolt in US-bound export revenues for the second half of 2023.

If its revenues were to merely hold steady in the second half it would finish the year with $134 million, and this combination would be effectively valuing the firm at 1.47x revenue.

That’s a bit of a premium to larger air cargo specialists like FedEx (NYSE:FDX), which trades at just over 1x, but a slight discount to more diversified logistics players like Expeditors (NYSE:EXPD) at 1.7x and Maersk at 2.5x.

ADVISORS

• Company
  • China & Partners is serving as exclusive financial advisor.
  • Cooley LLP is serving as U.S. legal advisor.
  • Ogier is serving as Cayman Islands legal advisor.
• SPAC
  • Maxim Group LLC is serving as exclusive advisor.
  • Ellenoff Grossman & Schole LLP is serving as U.S. legal advisor.
  • Yin Xu & Co. is serving as Hong Kong legal advisor.
  • Collas Crill is serving as Cayman Islands legal advisor.