Purchase in Spain helps protect CTT from Brussels winds
Flávio Nunes
7:11
The business of Cacesa, the Spanish company acquired this week by CTT, could benefit if the European Commission imposes new taxes on orders placed on platforms in China, such as Temu.
With Christmas just around the corner, CTT went shopping and brought in the cart the largest parcel clearance operator in Spain, Cacesa, present in more than 15 countries, in an investment of 104 million euros. The acquisition is strategic for the Portuguese company, especially with the European Union discussing restrictions on Asian e-commerce platforms.
It was already dawn when Correios communicated to the market the latest acquisition in the neighboring country, still subject to regulatory approval, which should "instantly increase around 100 million euros" to the Portuguese group's turnover.
The company is a specialist in clearing orders, especially those originating in China, one of the main source markets for orders delivered by CTT in Portugal and Spain in recent years.
In a presentation to investors, CTT recalls that orders from China to Europe represent 15% to 20% of global international e-commerce orders. Now, Cacesa "connects Europe and China, simplifying international trade and e-commerce between the two regions", reads one of the slides. In fact, in Portugal, CTT has even had the exclusivity of deliveries from the Chinese Temu since at least November 2023.
For CTT, this purchase does not only represent a growth lever. Cacesa could also be a protection against crosswinds coming from Brussels, admitted this Wednesday the CEO of the centenary Portuguese group, João Bento.
At stake is the potential brake on the advance of Asian platforms in Europe that is being discussed in the corridors of the Commission. Brussels estimates that four billion low-value parcels will enter the European Union this year, almost triple the number recorded in 2022. These packages escape customs control because they have a value of less than 150 euros. Therefore, in 2023 the end of this exemption was proposed.
It is not the only idea under discussion. The Financial Times also reported this month that the European Commission is considering creating a tax on the revenues of these platforms and an administrative handling fee on each order.
The aim is to counter the rapid growth of Asian platforms in the single market, which have much lower production costs than European companies and have been sending some potentially dangerous products to the region.
CTT's purchase of Cacesa still depends on regulatory approval
Cacesa
"I don't want to exaggerate optimism. I will not say that these barriers are good for us. But we look at them seriously and with great serenity," said the CTT leader this Wednesday.
In a virtual meeting with journalists, to explain the rationale for the purchase of Cacesa, the CEO of CTT detailed how this acquisition could help Correios to protect the business from these potential restrictions. If the Commission imposes new fees, "that, at the limit, is good news for Cacesa," said the manager. "Because the more difficult and more complex it is to clear customs, the greater the service provided to clear customs, the more expensive it is and the more useful an entity of this kind will be, as CTT already is today, in helping the customs clearance process", he said.
"One thing already seems evident after all these years: none of these entities has even had the temptation to come and install customs clearance platforms in the destination markets. Neither in Europe, nor in the US, nor in South America, which are the main destination markets", João Bento also noted, referring, albeit indirectly, not only to Temu but also to Shein and AliExpress, two other reference players of Asian origin.
The more difficult and more complex it is to clear customs, the greater the service provided to clear customs, the more expensive it is and the more useful an entity [such as Cacesa] will be.
Then, regarding a possible impact of new customs duties on product prices – and, lately, on consumer demand – the leader of Correios relativized the issue.
"I have a genuine Apple Watch, with a non-Apple strap, but it's the same as the regular one — and probably made in the same place. It cost 1.8 euros. If the European Union had the absurd temptation to impose, say, a 50% surcharge, the bracelet would cost about 2.5 euros. At Apple it costs I believe 100 euros. Therefore, there is a theme of elasticity here through the increase in price that I would say is completely irrelevant to the overwhelming majority of products purchased on these platforms", he exemplified.
In other words, and at a time when Europe's competitiveness is a topic under strong discussion, João Bento says that no fee or tax would solve one of the problems facing the European continent at the moment: "What is at stake here is an issue that is not solved either with taxes or with measures of this nature: it's a giant asymmetry between the productivity and prices of products produced in Asia — and China in particular, to focus on Temu — and manufacturing elsewhere," he commented.
CTT agreed to pay a group of investors, with a private equity fund at the head, 104 million euros to take over the Cacesa operation, above the company's 91 million enterprise value ("we paid a little more because the company has money", said João Bento). "From a strategic point of view, there is a huge fit," he said.
Guy Pacheco, CTT's financial director – or "the owner of the money", in the words of the CEO – agrees. "In fact, it is an operation that has a lot of strategic glue with us, since it will allow us to gain links in the chain a little upstream. There are a lot of synergies, services that we consume from third parties and that we will be able to do so within the scope of Cacesa", he said.
If approved by regulators, Cacesa, founded in the late 1980s by the airline Iberia, will be Portuguese sometime in March or April next year.
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