Cheetah Net Supply Chain Service Inc. Completes Edward Acquisition

Rhea-AI Summary

Cheetah Net Supply Chain Service Inc. (CTNT) has successfully completed the acquisition of Edward Transit Express Group Inc., a California-based global inbound non-vessel operating common carrier providing ocean and air transportation services. The total consideration for the acquisition was $1.5 million, with $300,000 in cash and 1,272,329 shares of the company's unregistered Class A common stock. Edward will operate as a wholly-owned subsidiary of Cheetah, and its general manager, Franky Zhang, will become the CEO of Edward. The acquisition is expected to reduce Cheetah's operating costs and generate new revenue streams.

Positive

• Successful completion of the acquisition of Edward Transit Express Group Inc.
• Total consideration for the acquisition was $1.5 million
• Expectation of significant reduction in operating costs and generation of new revenue streams

Negative

• None.

Insights

Market Research Analyst

The acquisition of Edward Transit Express Group by Cheetah Net Supply Chain Service Inc. is a strategic move that may have a significant impact on Cheetah's market positioning and operational efficiency. The deal, valued at $1.5 million, involves a cash payment and stock issuance, which is a common practice in mergers and acquisitions to align interests and fund transactions. By incorporating Edward's services, Cheetah aims to strengthen its logistical capabilities and become a more formidable player in the supply chain sector.

From a market perspective, this acquisition could potentially open up new revenue streams for Cheetah, as it allows the company to offer end-to-end solutions and attract a broader customer base. The expectation of reduced operating costs and increased revenue from warehousing and logistics services indicates potential for improved margins and profitability. Investors and stakeholders should closely monitor the integration process and the realization of the anticipated synergies, as these factors will be crucial in determining the success of the acquisition.

Financial Analyst

Financially, the acquisition of Edward by Cheetah Net Supply Chain Service Inc. is relatively small in scale, with Edward contributing $0.25 million to Cheetah's revenue pre-acquisition and reporting revenues between $0.5 million and $0.53 million for 2023. However, the strategic implications of the acquisition could be substantial. The payment structure, involving both cash and stock, suggests confidence in the long-term value creation from the deal. The stock issuance also dilutes current shareholders but could be justified if the acquisition leads to significant cost savings and revenue growth.

Investors should consider the price-to-sales ratio of the acquisition, which, based on Edward's reported revenue, appears to be around three times sales. This ratio should be compared to industry benchmarks to assess the relative value of the deal. The long-term benefits, such as cost reductions and new customer relationships, need to outweigh the immediate costs and dilution for the acquisition to be accretive to shareholder value.

Supply Chain Management Expert

The acquisition of Edward Transit Express Group is a tactical initiative by Cheetah Net Supply Chain Service Inc. to enhance its supply chain service offerings. The integration of a non-vessel operating common carrier into Cheetah's operations can lead to increased control over transportation services, potentially improving delivery times and customer service. By becoming a one-stop-shop, Cheetah can offer more cohesive and comprehensive services to traders, which is a competitive advantage in the supply chain industry.

However, the success of such an acquisition relies heavily on the effective integration of Edward's operations and culture into Cheetah's business model. The transition of Franky Zhang to the CEO of Edward as a Cheetah subsidiary could be beneficial for maintaining operational continuity and leveraging existing relationships. Stakeholders should monitor how Cheetah manages the integration and whether it can achieve the forecasted reduction in transaction costs without compromising service quality.

CHARLOTTE, N.C., Feb. 07, 2024 (GLOBE NEWSWIRE) -- Cheetah Net Supply Chain Service Inc. (“Cheetah” or the “Company”) (Nasdaq CM: CTNT) today announced the successful completion of its acquisition of Edward Transit Express Group Inc. (the “Acquisition”), a California-based global inbound non-vessel operating common carrier providing ocean and air transportation services (“Edward”). The Acquisition marks a pivotal achievement in Cheetah’s strategic expansion plans.

Tony Liu, Chairman and CEO, commented, “[t]he Acquisition positions us as a more visible competitor in our industry. This strategic move aligns seamlessly with our broader goals, strengthens our logistical capabilities, and enables us to provide end-to-end supply chain solutions. We are committed to leveraging the Acquisition by reducing transaction costs, creating new revenue streams, and becoming a one-stop-shop for traders within the global supply chain sector.”

Total consideration for the Acquisition was $1.5 million. The Company paid Edward’s sole shareholder $300,000 in cash and issued 1,272,329 shares of the Company’s unregistered Class A common stock having a market value of $1.2 million. Edward will operate as a wholly-owned subsidiary of Cheetah and Franky Zhang, the current general manager of Edward, will become a Cheetah employee and assume the position of chief executive officer of Edward.

In 2023, Cheetah extensively used Edward’s services, contributing approximately $0.25 million to its revenue. In 2022, Edward reported a total revenue of $0.48 million. Cheetah estimates that Edward’s revenue for 2023 ranged between $0.5 million and $0.53 million. With the Acquisition, the Company expects to significantly reduce its operating costs and to generate warehousing and logistics service revenues from current Edward customers as well as from new customer relationships that are developed by Cheetah.

About Cheetah Net Supply Chain Service Inc.

Cheetah Net is a supplier of parallel-import vehicles sourced in the U.S. to be sold in the PRC market. In the PRC, parallel-import vehicles refer to those purchased by dealers directly from overseas markets and imported for sale through channels other than brand manufacturers’ official distribution systems. The Company purchases automobiles, primarily luxury brands such as Mercedes, BMW, Porsche, Lexus, and Bentley, from the U.S. market and resells them to the Company’s customers, including both U.S. and PRC parallel-import car dealers. The Company derives profits primarily from the price difference between the Company’s buying and selling prices for parallel-import vehicles.

Forward-Looking Statements

This press release contains certain forward-looking statements, including statements that are predictive in nature. Forward-looking statements are based on the Company’s current expectations and assumptions. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. These statements may be identified by the use of forward-looking expressions, including, but not limited to, “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters, but the absence of these words does not mean that a statement is not forward-looking. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Important factors that could cause actual results to differ materially from those in the forward-looking statements are set forth in the Company’s filings with the U.S. Securities and Exchange Commission, including its registration statement on Form S-1, as amended, under the caption “Risk Factors.”

For more information, please contact:

Cheetah Net Supply Chain Service Inc.
Investor Relations
(704) 826-7280
ir@cheetah-net.com

FAQ

What is the ticker symbol for Cheetah Net Supply Chain Service Inc.?

The ticker symbol for Cheetah Net Supply Chain Service Inc. is CTNT.

What was the total consideration for the acquisition of Edward Transit Express Group Inc.?

The total consideration for the acquisition was $1.5 million, with $300,000 in cash and 1,272,329 shares of the company's unregistered Class A common stock.

Who will become the CEO of Edward Transit Express Group Inc. after the acquisition?

Franky Zhang, the current general manager of Edward, will become the CEO of Edward after the acquisition.

What is the expected impact of the acquisition on Cheetah's operating costs?

The acquisition is expected to significantly reduce Cheetah's operating costs.

What are the expected benefits of the acquisition for Cheetah Net Supply Chain Service Inc.?

The acquisition is expected to generate new revenue streams for Cheetah.

What were Edward Transit Express Group Inc.'s revenue figures for 2022 and 2023?

In 2022, Edward reported a total revenue of $0.48 million, and in 2023, Cheetah estimates that Edward's revenue ranged between $0.5 million and $0.53 million.