Shopify’s US$450M deal for fulfilment firm 6 River gets analysts’ thumbs up
Shopify Inc. slid after announcing the purchase of 6 River Systems Inc. even after analysts said the deal would help ramp up its Us$1-billion plan to set up a network of fulfilment centres in the U.S.
The Ottawa-based company disclosed the purchase of 6 River on Monday for US$450 million, with 60 per cent of that in cash and the rest in voting shares, according to a statement from both companies. Shopify fell 5.9 per cent in New York and 6.2 per cent in Toronto, to the lowest in a month, and extended the stock’s slump for a third day. It closed at US$337.24 in New York and at $442.98 in Toronto.
Waltham, Mass.-based 6 River uses robots and software to help fill retailers’ orders in warehouses. In June, Shopify laid out a plan to expand its fulfilment business to help merchants using its e-commerce platform deliver products, similar to Amazon.com Inc.
“We see the company’s leadership position in warehouse technology as a potential cornerstone of Shopify’s nascent effort to improve the fulfilment capabilities for merchants in the face of Amazon one-day delivery,” Baird Equity Research analyst Colin Sebastian said in a note.
6 River was founded by executives who came from Kiva Systems — now Amazon Robotics — and it operates in more than 20 facilities across the U.S., Canada and Europe. It fulfils orders for companies including Lockheed Martin Corp. and Office Depot Inc.
The deal is expected to increase Shopify’s expenses by about $25 million in 2019, with no material impact on its revenue for the year.
An investor darling in Canada’s ever-growing tech space, Shopify has climbed more than 1,400 per cent since it went public in 2015. It’s among the nation’s best performing stocks this year with a 150-percent surge, pushing its market value close to US$50 billion.
The 6 River deal underscores how e-commerce companies and investors increasingly view robotics as key to keeping up with shoppers’ expectations for reliable and fast delivery. The news follows Amazon’s acquisition of Canvas Technology earlier this year, which has built autonomous carts that move goods around warehouses. Bloomberg
With files from Reuters