Australia | May 29 2025
Its largest acquisition ever should transform WiseTech Global into the global trade powerhouse its founder wants it to be.
-Past three years landed acquisition target E2open in struggle street
-E2open's demise has become WiseTech Global's opportunity
-Strategically and financially positive, the acquisition could be transformative
-WiseTech's 55 acquisitions to date provide management with great track record
By Danielle Ecuyer
Light at the end of the tunnel
The past twelve months have been quite the roller coaster ride for WiseTech Global ((WTC)) shareholders.
The smorgasbord of negative impacts includes media and corporate governance scrutiny of the Founder, Executive Chair, and Chief Innovation Officer's personal life, as well as potential crossovers and conflicts of interest with the company he founded.
The stream of newspaper headlines has seen the share price fall from what were probably overbought levels around $140 in November last year to a sub-$80 low at the height of US tariff concerns in April.
Over the interim, Richard White's position was transitioned to consultant and then reinstated to a more substantive position following several high-profile resignations.
The company is still wanting of a succession plan, but hey, who needs one of those given WiseTech has just announced the biggest and most ambitious acquisition in its history under the stewardship of White: the US$2.1bn takeover of Texas-based E2open.
WiseTech's history a good starting point
By way of context, WiseTech has a history of bolt-on acquisitions, 55 over the past decade. Over that time frame, the company has achieved a market capitalisation of circa $35bn against an IPO valuation of $974m in April 2016. For those on board around the IPO and still holding on today, that trajectory translates into a return of 3,577.62%.
Over the years, many questions have been raised whether the acquisition strategy would succeed. Another stumble block stems from the higher valuation multiples ascribed to the stock, tripping up many a value investor.
The company's flagship product is CargoWise, an end-to-end logistics execution software platform used by freight forwarders, customs brokers, third-party logistics providers (3PLs), and multinational shippers. It is designed to manage and automate complex logistics operations across international supply chains.
Looking under the hood, Morningstar believes the switching costs for customers of WiseTech's main offering, CargoWise, are one of the most important factors for the company's competitive advantage, with annual retention rates over 99% since 2013.
Through this period, the company has pushed through steep price rises.
Morningstar believes CargoWise assists customers in outperforming competitors, which in turn lowers the risk of business failure.
Prior to the takeover, Morningstar noted half of the world's top 25 freight forwarders and a quarter of the largest 200 freight forwarders have signed up to use the software. Still, less than 10% of international freight forwarding volumes is estimated to go through the CargoWise platform.
Why E2Open?
According to Morningstar, CargoWise's main competitor in international freight forwarding is not Canadian company Descartes or US Flexport, but rather E2open's Blujay which has, the analyst's words, "fallen apart".
WiseTech has jumped on the opportunity of a decline in E2open's share price of -70% over the last three years.
The bid at US$3.30 per share represents a 29% premium to the May 23 closing price, but is still -56.8% below the price a year ago.
According to WiseTech founder White: "Acquiring E2open is a strategically significant step in achieving our expanded vision to be the operating system for global trade and logistics".
Expanding the market base
E2open is a supply chain SaaS (Software-as-a-Service) provider, founded in 2000, with operations across 20 countries and a cloud-based platform that connects over 500,000 partners including manufacturers, logistics providers, and distributors with 18 million transactions annually.
WiseTech's ambition is to become an end-to-end supply chain solutions services provider beyond CargoWise's logistics execution software.
E2open brings along a substantial uplift in the direct customer base and industry exposure to upstream shippers and manufacturers, referred to as beneficial cargo owners, 'those companies which produce and sell goods, including 5,600 customers and over 250 top-rated companies across autos, retail, pharmaceuticals, consumer goods, aerospace, and more".
It opens greater exposure to US and European markets, as well as bringing in relationships with major shipping lines and carriers.
Importantly, E2open moves WiseTech from serving the logistics industry to serving the entire supply chain, shifting from freight forwarding and warehousing to an end-to-end global trade platform.
Seems too good to be true?
Too good to be true? Certainly, that is what some analysts are thinking.
Jarden is notably circumspect while acknowledging the strategic fit and potential benefits of the takeover, including management's expectations that global supply chain/logistics software spend will rise at a compound average growth rate of 16% from US$28bn in 2024 to US$57bn in 2029.
The analysts' concerns centre on E2open's flagging financial performance over the last couple of years, which resulted in the share price fall that became the precursor to the WiseTech bid.
UBS highlights E2open delivered a string of below-expectation earnings results, with management changes and a strategic review that contributed to the acquisition multiple at circa 3.5 times Enterprise Value to Sales against WiseTech's historical takeover multiple of around 6.1 times.
Jarden queries the churn rate for E2open and the operating loss in 2024 of around -US$24m, which was caused by sizeable goodwill write-downs on acquisitions.
Morningstar points to integration problems with the many acquisitions, "especially between its products for freight forwarders, such as BluJay and the beneficial cargo owners. High debt created further pressure".
At an enterprise value of US$2.1bn, the takeover does lift net gearing for WiseTech to 3.5 times.
On the flipside, if the integration, cost-stripping, and synergistic benefits are realised, E2open will be EPS-accretive in the first year of consolidation, and cash flows will allow WiseTech to deleverage to under 2 times within three years, with all of E2open's debt facilities to be repaid upon completion of the acquisition, Morgans notes.
E2open is financially larger than all previous acquisitions over the last decade, with FY25 revenue of US$608m against Jarden's revenue estimate for WiseTech of US$797m for FY25.
Bell Potter also highlights a level of risk to the integration of such a sizeable company but views the track record of success as going some way to ameliorating the risks.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE