Suitors for Scott’s Refrigerated Logistics face regulatory hurdle

Indicative offers were due on Thursday for Scott’s, which fell into receivership, as KordaMentha, working as receiver, remains up against the clock to find a buyer.

An acquisition of Scott’s Refrigerated Logistics by Toll Global could face scrutiny by the competition watchdog.

Indicative offers were due on Thursday for Scott’s, which fell into receivership, as KordaMentha, working as receiver, remains up against the clock to find a buyer.

Suggestions are that the company is running out of cash and may not to keep operating for much longer.

But one market expert believes that should Toll acquire the operation, it would create a highly concentrated market and could be a problem from an Australian Competition and Consumer Commission perspective when it comes to approving for the transaction.

Scott’s is the largest refrigerated trucking company in Australia with a fleet of more than 500 trucks and 1000 trailers, and it is a direct supplier to Coles and Aldi and delivers on behalf of vendors to Metcash IGA stores.

Major customers were being asked for a funding lifeline for the business while a new buyer can be sought.

The three parties firming as the strongest contenders to buy the business are Toll Global, owned by Allegro Funds, Lindsay Australia transport and Linfox.

While Scott’s is the industry’s number one player, all three suitors are close to being the second largest.

Linfox is known to be a highly opportunistic investor and it is thought its willingness to buy the business would depend on the quality of the fleet. It would weigh up what needed to be spent on getting it up to standard if it was not there already.

Typically, Linfox prefers to invest in logistics property rather than trucks, despite it having the largest trucking fleet in the country, according to one market expert.

Although Scott’s was the largest refrigerated trucking company, players like Linfox and Toll have some capacity already in the industry.

The situation highlights the dilemma for supermarkets, where if they negotiate with their contractors and do not pass on costs, the risk is that some collapse, creating less competition.

The transport industry is a low margin business as it is, but refrigerated logistics is even more so, and such companies are highly capital intensive.

Gordon Brothers is owed $70m while Scottish Pacific is also a lender, with overall debt of at least $100m.

The price paid for the business may well be less than the debt after it lost $7.3m for the 16 months to June 2021.

Anchorage picked it up in 2020 for $75m from AP Eagers, and has since been impacted by flooding, the l pandemic and rising costs.

It also appointed McGrath Nicol working as voluntary administrator.