Royal Mail bags Californian acquisition to beef up GLS parcel arm

Royal Mail has acquired a US next-day parcel delivery company for $90m (£71m) as it looks to carefully expand its General Logistics Systems (GLS) arm overseas.

Golden State Overnight Delivery Service (GSO), which is based in California and operates in Arizona, Nevada and New Mexico, has been acquired on a cash- and debt-free basis.

Founded in 1995 by Dana Hyatt, who will remain chief executive and continue working with his current management team, GSO generated $114m sales in the year to 31 March 2016 but post-tax earnings are not expected to exceed the amount invested multiplied by the cost of capital until 2020.

But GSO, which makes around 13.5m deliveries per year and has a market share of just 1%, has been acquired for its geographic positioning and expansion potential.

Royal Mail highlighted that the states in which GSO operates have a combined gross domestic product roughly equal to the UK and are experiencing faster GDP growth than both the UK and continental Europe.

"It is well-positioned to benefit from growth in intra-State deliveries within its existing geographic footprint."

GLS chief executive Rico Back said: "The acquisition of GSO is in line with our strategy of careful and focused geographic expansion. GSO operates in an attractive regional market representing the world's fifth largest economy, and provides GLS with an opportunity to grow GSO within its existing footprint."

The deal follows GLS's €71m (£63m) acquisition of ASM Transporte Urgente (ASM) in June 2016.