Silk Logistics has shared an update regarding the performance of its wholly owned subsidiary, Secon Freight Logistics Pty Ltd, and the earn our payment that will become payable to sellers to shares in FY26.
Silk had announced the acquisition of all Secon shares on 4 August 2023 for $30 million in upfront cash and $5 million in Silk shares, plus a deferred earn out payment determined by reference to 5.0x EBITDA achieved by Secon in each of the FY24 and FY25.
The final Second earn out payment will fall due in or around October 2025, with Silk stating it is likely to be higher than the $10.7 million deferred earn out payment made on 27 February 2025.
Currently, it expects this final payment to be in the region of $20-$25 million.
“In connection with the ongoing preparation of management accounts for the March quarter, it has become apparent to Silk that due to Secon’s recent out performance, the Final Secon Earn Out Payment will be materially higher than the provision,” a company ASX statement reads.
“This is as a result of Secon experiencing a significant increase in uncontracted volumes in the first quarter of calendar 2025, which was not predicted as at the date that the HY25 results were first prepared.
“The Company is not year in a position to calculate the Final Secon Earn Out Payment with a reasonable degree of certainty but based on Secon’s year-to-date trading and current management estimates for the remainder of FY25 (which are unaudited), the Company currently expects that the Final Secon Earn Out Payment could be within a range of $20 million to $25 million).
“The exact number cannot be determined until Secon’s annual EBITDA to 30 June 2025 is known, and will vary on a number of factors including:
- Trading conditions in the period to 30 June 2025;
- Secon’s ability or otherwise to continue to attract uncontracted volumes during that period;
- Secon’s capacity to service those volumes;
- The state of global and local logistics markets; and
- Preparation of the completion accounts as required under the Share Sale Agreement.
“The Company will continue to monitor Secon trading conditions and, if required, will provide an update to the market.”
The first and second earn outs were $7.94 million and $10.7 million respectively
The first earn out payment relating to FY24 was subsequently paid out in March 2025.
Prior to being acquired by Silk, Secon was a family-run business founded by Jim Seide and Maurie Considine in 1969 and operated with 160 staff across two Victorian sites.
The ASX acquisition statement said, at the time, Secon generated an annual revenue of over $65 million with strong margins and operating cash flow.
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