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Sep 10, 2019

Shopify gets 'shot in the arm' after US$450-million acquisition

Shopify investing in warehouse tech

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Shopify Inc.’s initiative to spend US$1 billion to set up a network of fulfillment centers in the U.S. has gained momentum after it announced the acquisition of 6 River Systems Inc., analysts said.

The Ottawa-based company announced the purchase of 6 River on Monday, valuing the deal at US$450 million, which consists of about 60 per cent cash and 40 per cent voting shares in Shopify’s stock, according to a statement from both companies. Waltham, Massachusetts-based 6 River uses robots and software to help fill retailers’ orders in warehouses.

In June, Shopify laid out a plan to expand its fulfillment business to help merchants using its e-commerce platform deliver products, similar to Amazon.com Inc. 6 River was founded by executives who came from Kiva Systems -- now Amazon Robotics -- and it operates in more than 20 facilities across the U.S., Canada and Europe. It fulfills orders for companies including Lockheed Martin Corp. and Office Depot Inc.

Here’s what analysts said:

-PiperJaffray (Michael J. Olson): “The deal is intended to provide a shot in the arm for the company’s initiative to build out a fulfillment network.”

-Jefferies (Samad Samana): 6 River’s leadership team seen as valuable to Shopify given two executives previously worked at Amazon.com.

-Wedbush (Ygal Arounian): The deal puts Shopify in the conversation with Amazon as it strives to be a leader in logistics and fulfillment services.

          “We view this as a great acquisition for Shopify.”

-Raymond James (Brian Peterson): Deal gives Shopify the “technical know-how” as it adds intellectual property to its broader fulfillment ambitions.

 

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The deal, poised to close in the fourth quarter, is expected to increase Shopify’s expenses by about $25 million in 2019, with no material impact on its revenue for the year.

An investor darling in Canada’s ever-growing tech space, Shopify has climbed more than 1,400 per cent since it went public in 2015. It’s among the nation’s best performing stocks this year with a 150 per cent surge.

--With assistance from Kristine Owram.