The delivery group’s overseas freight arm GLS International is picking up family-owned freight group Rosenau Transport to expand operations in North America’s $25 billion parcel market, which is growing at 5% a year.
The Rosenau network will tie up with existing GLS routes on the US west coast, extending its cross-border capacity.
Royal Mail believes the deal, funded through a mixture of cash and debt, will add to earnings this year and accelerate its growth ambitions for the international arm, which is its most profitable division.
It has outlined plans to double profit from GLS to €500 million from 2020 to 2025.
Success would strengthen the case for its demerger from the UK parent, which is weighed down by its letters operation and large pension liabilities.
Shares in the company advanced 0.8% to 416.9p in early trading. The stock is up 23% this year.
GLS chief executive Martin Seidenberg said: “The addition of Rosenau Transport to GLS complements and enhances our accelerate strategy.
“With its strong presence in western Canada, high quality, entrepreneurial culture, as well as freight capabilities and parcel potential, Rosenau Transport’s model is similar to our existing Canadian business and provides an excellent fit.”
Rick Barnes, president of GLS Canada, said: “As we link two regional carrier networks together, with direct service to most cities and towns in the country, we will produce one of the most integrated transportation systems in Canada.”
Rosenau Transport posted revenue of C$175 million and underlying earnings of C$41.6 million in the 12 months to September. It has 24 owned facilities throughout four Canadian provinces.
Royal Mail expects the deal to close on December 1 subject to regulatory approval.
AJ Bell’s Russ Mould said: “While the UK arm has benefited from Covid and an increase in the volume of parcels being sent due to the e-commerce boom, costs are likely to see upwards pressure in the near-term as the company launches its seasonal recruitment drive, with the business impacted by wider staffing shortages in the economy.”