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Sydney-based Federation Asset Management and investors in one of its funds remain in the dark regarding how much they can recover from the collapse of FAST Group after confirming that the merged entity, which includes the Australian subsidiary Sendle, are being wound up.
A meeting of investors in the Federation Alternatives Investment Fund II held today was told that the board of FAST Group resolved on 10 January to wind down the company after a deterioration in the merged group’s business affairs including “strained relationships” with suppliers.
FAST Group was established just five months ago after ACI Logistix undertook a scrip-for-scrip acquisition of Sydney-founded parcel delivery disruptor Sendle and US-based FirstMile.
Federation today points out that it has been an investor in and supporter of Sendle since December 2018 and following an approach by ACI Logistix had backed the three-way US merger which was completed in August last year.
“Federation believed the merger to be accretive to its existing investment in Sendle and, on that basis, underwrote additional capital investments both at the time of, and following, the merger,” says Federation in a statement.
“Since the merger it has emerged that ACI Logistix was not current on its financial obligations at the time of the merger, contrary to representations made to Federation during the due diligence process.
“The merged entity’s operating performance had since been adversely affected by strained supplier relationships arising from non-compliance with payment obligations.”
While problems with the merger were first revealed this week when Sendle, which largely provides parcel delivery services for small businesses, informed customers that it was halting all bookings, trouble has been brewing at FAST Group for several months.
The decision to wind down FAST Group follows several attempts by Federation to steady the business, including agreeing to an early request by the FAST Group board for emergency funding.
It is understood that a subsequent request was denied by Federation in favour of exploring other options to keep the business from going under, including a change in management and leadership.
However, these options were unable to be finalised leading to the decision at the weekend by the FAST Group board to wind down the company.
FAST Group, which is overseen by a board comprising representatives from all three merger parties, is led by Keith Somers who was CEO of lead merger partner ACI Logistix prior to the acquisition of Sendle and First Mile.
Federation says it continues to act on behalf of its investors “to maximise potential recoveries”, however the fund manager says the “quantum and timing of any recoveries are uncertain”.
Prior to the merger, Sendle was a stand-alone success story in the Australian start-up space.
Founded in Sydney in 2014 by James Chin Moody, Sean Geoghegan and Craig Davis to support small businesses and sole traders in direct competition with Australia Post, the company expanded to service clients across the US, Australia and Canada with the backing of Federation Asset Management among other investors.
In 2020, when Sendle was riding the e-commerce boom, the company raised $19 million to fund growth and welcomed King River Capital, a Sydney and San Francisco-based venture capital firm, Alberts Impact Capital and Marinya Capital as new investors. This followed a $20 million a Series B round in 2018 which was led by Federation.
In 2021, Sendle raised $45 million in a Series C round to fund us expansion.
Business News Australia sought comment from Sendle on its potential future in the wake of the collapse of FAST Group.
In a brief response, the company reconfirmed that it is no longer taking any future bookings.
“We are not able to provide any further comment at this time,” says the company.
Business News Australia also has sought further comment from Federation in relation to its financial exposure to FAST Group.
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